Intro to Investment Performance

Editor’s Note: “Chase Carey” has been sending us pieces for months. Sometimes via InMail. Sometimes scribbled on Chipotle napkins and delivered via courier. We publish the pieces that seem most coherent, though coherent is relative, as a series called “Inherent Price.

You're in the Uber to Nebulous Capital Management. The driver has been talking about his screenplay for eleven minutes. It's about an Uber driver who becomes a hedge fund manager. His strategy is simple: long pickups, short dropoffs. He believes this has legs.

"The third act is where it gets interesting," he says. "He discovers he can arbitrage surge pricing against himself." You nod.

Nebulous manages $2.2 billion. The money came from SkyMall. Or maybe Pall Mall cigarettes. The story changes depending on who's asking and what day it is.

The driver's still talking. "See, the key insight is that every ride is just a call option on future rides."

You're starting to think he might be one of your LPs.

From: Co-GP
To: You
Subject: RE: RE: nebulous cap deep dive

pls be mindful of NCM thesis on law of conservation of returns - team is philosophically committed to being the necessary negative in the universes PnL. encourage you to focus less on returns and more on performance

-MH

Q3 shows +47%.

You blink.

The number is replaced with the words "Crushing it."

You refresh.

Now it says "dw about it."

Your seatmate glances over. "You in the show too, hoss?"

You look at him, puzzled.

"fuh-nanz," motioning toward your screen, “ya know, the show.”

You cannot believe he referred to your industry as the show. The show. Like some minor league pitcher finally making it to Yankee Stadium.

Your spreadsheet flickers: "Enter SEATMATE, stage left, typing."

You shake your laptop slightly. The WiFi icon spins.

He starts typing louder. His mechanical keyboard clicking like a blackjack dealer on Adderall. You match his tempo. Then exceed it.

Your spreadsheet updates: "TWO MEN, typing. The sound builds."

His typing intensifies. He's switched to keyboard shortcuts only. Control-shift-everything.

You counter with one-handed typing while checking your phone with the other. He notices. Starts typing with his elbows.

"[LIGHTING: Cabin dims to 20%]" your Excel sheet declares. The flight attendant walks by, concerned.

You're both sweating.

The CIO of Nebulous is three children in a trench coat. No wait, that's your anxiety talking. The CIO is real. The CIO is explaining their investment philosophy while you're still on the plane. Time is a flat circle and the circle is your pitch deck.

You recall the least interesting Substack article of all time, which has permanently nestled in front of everything else you should be thinking about.

[From "Don't Get Cucked by the Zuck: How a Perfect SAT Score Fucked Us All"]*

"Success requires one skill above all: seeing systems where others see standards."

You're about to pitch a system to people who see through systems. You're pattern-matching to pattern-matchers. You're so fucked. But also, seemingly so back.

FLIGHT ATTENDANT: (over intercom) In the unlikely event of an exit...

You're going to Nebulous Capital. They manage the SkyMall fortune.

Message from Co-GP: NCM team has deep focus on fit per ls @ Arch Ventures

Let's be honest about what you're pitching:

[The Zuck thinkpiece has opinions about this]

"The 1600-point brain doesn't see humans—it sees algorithms made of carbon"

That's you. You're the carbon algorithm. You're about to pitch carbon to carbon about carbon returns.

New pitch deck idea. Xzibit 1:

“Yo dawg, I heard you like carbon...

so I put some carbon in your carbon

so you can pitch carbon to carbon

about investing in carbon while being carbon investors.”

You're in the lobby. The receptionist is your AI notetaker.

"Name?" "I'm here for—" "Performance. Yes. They're expecting performance."

Your AI notetaker has joined the meeting. It's taking notes in wingdings.

Your AI notetaker transcribes: 'THE MEETING HAS STARTED. THE MEETING HAS NOT STARTED. SCHRODINGER'S PITCH: YOU ARE SIMULTANEOUSLY CRUSHING IT AND EATING SHIT.'

CIO: "Nebulous is a single family office managing the wealth of a legacy industry scion for future generations."

You nod like you understand what legacy industry means in 20… whatever year it is.

"We've got just under $2.2 billion under management with an exclusive focus on alternatives."

ANALYST: "We have significant exposure to oat milk, Linux, Atlantic City..."

Everything is alternative to something. You are alternative to yourself.

"That's... diverse," you manage.

ANALYST: "'We're generally bullish on the more unique ideas,' the analyst continues. 'The pause between songs at concerts’, ‘the unique scent of a cellar’...”

"Diversity is just concentration risk in disguise," says the CIO.

Slide 0: "How we think about portfolio construction"

Slide 1₁: "How we think about answering that question"

Slide 1₂: "How we think about how you think"

Slide 1₃: [This slide is watching you present it]

Slide 1₄: [This slide is watching you fuck up Slide 1₃ while peeking out from the little presentation mode “on deck” circle]

The CIO leans forward. "Interesting approach to performance reporting." "

We believe in radical transparency," you hear yourself say.

"We believe in radical opacity," they respond. "Complete transparency and complete opacity are the same thing."

Slack message from Co-GP: performance agnostic still means you have to perform dummy

“How do we think about fit?” you think to yourself.

Instead you flip forward a few slides. “Our fund's strategy remains consistent: We invest exclusively in companies that measure their own performance metrics, creating a recursive loop of value that technically violates the laws of thermodynamics but not the laws of Delaware.”

“Who else is invested?” asks the Analyst.

“Does it matter?” you don’t say.

“They’re invested in themselves,” you explain instead, “they leverage AI agents to measure the performance of their own AI performance calculations and calculate the optimal capital balances.”

YOUR CO-GP: We call these synthetic performance vehicles. We find they perform better given their flexibility. In a market like this, it’s important to be able to be dynamic.

AD READ (V.O.): BAE Space & Mission Systems in Boulder, Colorado. They introduce beta into any environment.

Your seatmate had said: "We think about returns more as interpretive dance."

Now the Nebulous team is literally dancing. The analyst is doing the Running Man. The CIO is attempting the Worm. Your returns are being expressed through movement.

"Is this... due diligence?" you ask.

"Due diligence is just foreplay for disappointment," says someone who might be you.

The CIO stands. Reality warps around them. "Tell me," they say, "what is performance?"

“Performance," you say, "is when your losses are so sophisticated that they look like gains to anyone who didn't go to Wharton."

The room goes silent. Then—applause? No, that's your heartbeat.

The CIO stands and faces the wallmounted Webex by Cisco QuadCam.

THE CIO:

To hedge, or not to hedge the hedge that hedges

The hedges hedging hedges' hedged positions?

'Tis nobler in the fund to suffer leveraged Derivatives of derivatives' emissions,

Or take arms against this sea of basis points And by re-shorting, short them?

To long, to short— No more—and by a short to say we long

The very shorts we shorted long ago,

'Tis a position devoutly to be wished.

Want More Inherent Price?

Asset Class: You

Investment Thesis: Existing (Bullish)

Performance: The Chainsmokers @ Worldwide Stage, Ultra Music Festival Miami, 03-19-2016

Exit Scenarios:

Q: Track record?

A: TBU, have to check with Uber driver.

Q: Investment process?

A: Processes are invested. Investments are processed.

Q: Risk management?

A: Risk manages us.

Q: Performance attribution?

A: ME with ANXIETY and REGRET

The CIO stands. Are they about to shake your hand or throw you out? Both. Neither. The superposition holds.

"We'll invest," they say, "but only if you promise one thing."

"What?"

The CIO hands you his business card. Tony's card has a subtle wood grain texture. Of course it does. His business card lists his certifications: CFA, MBA, and somehow, inexplicably, OSHA 10-Hour.

You recognize the typing cadence in his handshake.

The same measured grip pressure. Torqued to exactly 15 foot-pounds.

Your seatmate from the plane. It’s the CIO.

The CIO winks.

You’ve been on the plane this whole time.

Someone in 14B starts slow clapping.

From: [email protected]

Subject: Re: Investment Decision Dear {first.name},

Following our discussion tomorrow, Nebulous Capital will not be proceeding with an investment.

Our decision is based on a fundamental incompatibility: your fund measures performance, while we exclusively invest in funds that perform measurement. These are inverse strategies that would cancel each other out upon capital deployment.

We wish you success in finding LPs whose mandates align better with your strategy.

Regards,

Investment Committee Nebulous Capital Management

¹ I am the footnote. I perform citation without meaning. I am the academic equivalent of a blue checkmark. I verify nothing but my own existence, which remains unverified.