A Decade of Cheap Money Made Mediocre Capital Allocators Look Brilliant
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A decade of cheap money made mediocre capital allocators look brilliant.
The cycle turn is separating the CEOs who compounded real value from the ones whose gains came from rising valuations. In a rising market, you can't tell them apart. It takes higher capital costs to reveal whose business ended the cycle stronger than it started.
Three patterns stand out.
First, the CEO who built durable infrastructure during the boom and now controls capacity everyone needs. The cloud platforms show it plainly. Amazon Web Services (AWS) was built under Andy Jassy before he took over Amazon. Azure runs under Satya Nadella. Both now run close to capacity against AI demand rather than scrambling to build it.
Second, the CEO who spent to keep options open and now carries the cost with no clear path to the returns that justified it. More than $3.5 billion has gone into Snap Inc.'s augmented-reality hardware, which still burns around $500 million a year. Activist investor Irenic Capital Management LP is pushing Evan Spiegel to divest it.
Third, and the most revealing: the CEO who pulled back before the cycle forced the decision. Doug McMillon at Walmart before his 2026 retirement, and Indra Nooyi's sequencing at PepsiCo before her departure. Both narrowed the portfolio while they still had the freedom to choose what to keep.
We read all three through leadership. The dollar figures matter less than what they reveal: whether the CEO can name what they were building toward, whether the capital allocation record fits the challenge the business now faces, and whether they will cut a favored bet with conviction when the cycle turns.
That last test is capital preservation, and it is the hardest to fake. The work we do before the turn lets us size into the survivors early and hold through the drawdown that shakes others out.
Which CEO in your portfolio built something this cycle will reward, and which is still funding a bet the market stopped paying for?
🔗 Source: Snap Climbs 14% as Activist Irenic Suggests Changes to Boost Stock’s Value 7x
