Why Public Markets Punish Concentration?

The Allure of Concentration

There’s something deeply appealing about concentrated bets. They feel bold, decisive — a signal that you’ve seen the future, and you’re backing it fully.

Venture capital thrives on this mindset. In that world, swinging hard for a few moonshots is not just accepted — it’s expected. But public markets are a different system. They don’t reward conviction in the same way. They reward adaptability.

And as 2025 has reminded many investors, what works in one system can quietly unravel in another.

Why does concentration work in venture capital — but fail most in public markets?

Venture Capital: A Game Built for Outliers, Controlled by Insiders

Venture capital is designed for asymmetry.

• A handful of investments are expected to deliver the majority of returns.

• Most will fail. That’s not a risk — it’s part of the model.

But VC is not just about tolerating risk.It’s about controlling it.

Venture investors don’t just deploy capital — they shape outcomes:

• They influence strategy.

• They advise founders.

• They guide pivots and growth.

Concentration in VC works because investors are active participants. They place fewer, riskier bets — and have the ability to push them forward. It’s a system where control justifies concentration.

Public Markets: A Game of Exposure, Not Control

In public markets, the dynamic is entirely different.

You don’t control the outcome. You don’t influence the boardroom. You are exposed to forces you cannot shape — cycles, sentiment, policy shifts, liquidity tides.

Concentration here is fragile.

• To succeed, you need more than a good idea.

• You need to time it right.

• You need supportive macro conditions.

• You need sentiment on your side — and to stay there.

And you have none of the levers a VC does.

Public market investing is about navigating systems — not shaping them.

Diversification: Not Safety, But Strategic Adaptability

Diversification is often misunderstood as playing it safe. But it’s not about caution — it’s about adaptation.

In public markets:

• Leadership rotates.

• Macro conditions shift.

• No narrative lasts forever.

Diversification works because it aligns you with the evolving system — without requiring you to predict every turn. It spreads exposure across regions, styles, and assets — allowing you to benefit as different parts of the market take the lead.

Diversification is not about avoiding risk. It’s about avoiding overcommitment to a world that might already be changing.

Behavioural Fragility: The Hidden Risk of Concentration

Even if a concentrated bet is right long-term, few investors stay the course.

• Sharp drawdowns create emotional pressure.

• Panic leads to poor decisions — selling low, missing rebounds.

• Behaviour, not just returns, drives failure.

Diversification helps reduce not just portfolio volatility — but the risk of emotional exits.

The more concentrated you are, the more exposed you become — to markets, and to your own reactions.

2025: A Turning Point for Diversification

This year has made the case plain.

• US tech, the darling of concentrated bets, faltered. Nasdaq dropped nearly 20%.

• Diversified portfolios? They didn’t just hold up — many outperformed.

• Gold +25%

• Brazil +18%

• Low-volatility stocks +12%

• Copper +22%

• International markets led, as US dominance paused.

This wasn’t about hedging — it was about systems activating differently. While one part of the market struggled, others stepped in.Diversification worked because the system shifted — and diversified portfolios didn’t have to guess where.

Control vs. Exposure: Know the Game You’re Playing

This is the essential difference:

• Venture capital is a game of control. Concentration is a feature.

• Public markets are a game of exposure. Diversification is a necessity.

In VC, you shape outcomes.In public markets, you adapt to them.

Concentration in public markets assumes the world will keep rewarding what’s already worked.Diversification accepts that it won’t.

What kind of system are you investing in — one you control, or one you must navigate?

Diversification as a Systemic Edge

Diversification isn’t about missing out. It’s about staying in. It allows you to participate consistently, across different environments — without having to bet everything on a single story.

In volatile, shifting markets, the goal isn’t to be right all the time.It’s to stay in the game long enough for resilience and adaptability to do their work. Because in public markets, the biggest risk isn’t short-term volatility.It’s failing to reach your goals because your bets didn’t match the world as it actually evolved. And when the system turns — as it always does — being spread across it is what keeps you moving forward.