Essay | Kevin Gee and Nick Chow | Investing Through Complexity

Created

Jul 19, 2025 3:17 PM

Note

If you read this newsletter, you probably know about Kevin’s compilations. In fact, you’ve probably even bookmarked a few. But you’ve probably (definitely) never actually read one cover-to-cover.

Unlike Kevin’s letters, which are typically a single letter that gives you insight into a single person, or his anthologies, which are his way of telling a story of some of the people and companies he finds interesting through a series of letters, notes, quotes, and/or videos, his compilations range from tens to thousands of pages and are a deep dive into a specific person, firm, or theme.

For this Friday Five, we wanted to highlight five investors tied together by a single intellectual foundation: complexity science and the study of complex adaptive systems.

Theme

“We talk about clarity of purpose and simplicity and focus. And we think that the most important thing in the investment business is to keep everything absolutely as simple as you possibly can. We think complexity is the biggest barrier to high performance in the investment business. And so we design around complexity.”
— Reece Duca

Reece Duca’s words capture a fundamental principle in investing: simplicity, clarity, and focus often lead to better decisions and better results. The most common advice passed from one generation of investors to the next is to avoid unnecessary complexity—to stay within your circle of competence, to favor what’s obvious, to design around complexity wherever possible.

Yet some of the most successful investors of our time have done precisely the opposite. What if the best opportunities live in what Bill Gurley calls 'the messy middle'—where network effects create winner-take-all dynamics, where feedback loops amplify small advantages into insurmountable moats, where power laws mean the best investment isn't just better, but 10,000x better? What if the key to clarity isn't in avoiding complexity, but in understanding and navigating it with the right lens?

This collection brings together five investors who’ve done just that: Bill Gurley of Benchmark, Nick Sleep and Qais Zakaria of Nomad, James Anderson of Baillie Gifford, the team at Dynamo, and Bill Miller of Legg Mason. Though their styles differ, they share a common intellectual foundation—one informed by the Santa Fe Institute and the study of complex adaptive systems.

What makes these five especially interesting is not just their exposure to complexity science, but how differently they apply it. Gurley translates systems thinking into frameworks for understanding defensibility and disruption. Nomad approaches investing with philosophical clarity, using humor and metaphors to ground complex ideas. Anderson writes with the patience of a long-view optimist, finding simplicity in narratives of technological evolution. Dynamo draws from on-the-ground experience in emerging markets, offering a systems lens to environments most investors oversimplify. And Bill Miller, perhaps the most openly intellectual of the group, fuses behavioral finance, philosophy, and probability into market commentary that resists easy classification.

These ideas weren't just intellectually satisfying—they generated billions in returns.

Increasing Returns (Brian Arthur): Bill Gurley drew on SFI’s work on increasing returns and network effects to build conviction in Uber. He led Uber’s Series A in 2011 at a $60M valuation. Today, Uber’s market cap is over $200bn. Bill’s investment generated a reported $7bn+ for Benchmark.
Scaling Laws (Geoffrey West): Nomad applied scaling laws and power law distributions to his long-term thesis on Amazon. Sleep and Zakaria first mentioned Amazon in their 2004 annual letter, and began buying its stock aggressively in 2005 at $30/share (market cap ~$15bn). After wounding down Nomad, Amazon was one of just three stocks Sleep owned. Today, Amazon trades at $222/share ($4,440/share; they conducted a 20:1 split in 2022) and has a market cap of $2.36tn.
Innovation Rates (Jessica Trancik): James Anderson used SFI-inspired work around exponential change and energy innovation rates to underwrite Tesla well before it was consensus. Anderson first bought Tesla shares in 2013, when they were trading at $6/share (~$10bn market cap). Today, Tesla’s market cap is ~$1tn, and James’ investment generated a reported ~$30bn for Baillie Gifford. James has often credited SFI’s ideas with fundamentally driving every significant investment he’s made, including Amazon, Nvidia, Facebook, Tencent, and Alibaba.
Complex Adaptive Systems (John Holland): Dynamo leaned on systems thinking to spot Mercado Libre’s potential in fragmented Latin American markets. They first laid out their thinking around markets being complex adaptive systems in a 2007 letter, the same year they invested in Mercado Libre’s IPO at ~16/share (although they quickly sold when the stock price doubled in just a few days). They re-initiated a position, at size, in 2016 at $166/share (~$8bn market cap). Today, the company trades at $2,500/share ($125bn market cap).
Complexity Science (Murray Gell-Mann): Bill Miller used a broad range of core complexity ideas such as emergence (Stuart Kauffman), networks of exchange, and computational complexity to understand Bitcoin as an emergent monetary system. Bill first purchased Bitcoin in 2015 when it was trading at ~$200/BTC. Today, Bitcoin is trading at $110,000/BTC. Bill has also credited SFI with inspiring his investments in Dell and Apple in 1995, Amazon in 1999 (Legg Mason became the second largest holder of Amazon, only behind Jeff Bezos), and Google at its IPO in 2004 (market cap at the time was $23bn; today it is $2.2tn).

All five investors work from a similar foundation, yet their expressions are highly distinct. That’s what complexity does: it permits multiple valid paths to insight. As Andy Benoit observed, “Most geniuses—especially those who lead others—prosper not by deconstructing intricate complexities but by exploiting unrecognized simplicities.” These investors do both. They move through complexity to arrive at a simplicity that is hard-earned, not superficial.

Read these compilations not as investment literature but as a masterclass in applied thinking. They offer a glimpse into how frameworks from complexity science can yield practical insights—not only for picking stocks, but for understanding how the world works. They remind us that while investing may be “simple, but not easy,” it can be deeply coherent.

Duca is right—complexity is indeed a barrier. But with the right lens, it becomes a moat. Those willing to cross it may find a clarity that, from the outside, looks like brilliance or luck.

Sometimes, the best investors design around complexity. Other times, they walk straight through it.

Below, you’ll find short introductions to five investors who chose to invest through complexity, along with compilations of their collected writings. We’ve chosen to present these works as long-form bodies of thought to highlight how their philosophies evolved over time — and how the ideas of the Santa Fe Institute helped shape both their frameworks and their investment decisions.

Compilations

Bill Gurley

Few people (let alone VCs) have documented technological revolutions as they unfolded with the clarity and prescience of Bill Gurley. For three decades, Gurley's "Above the Crowd" newsletter has served as a real-time chronicle of the most significant shifts in technology markets — the emergence of the modern internet, the rise and fall of the dotcom bubble, the emergence of marketplace businesses, the transition to mobile, and the evolution of platform economics. Reading Gurley's work today offers something increasingly rare: a point-in-time perspective on how these massive technological transitions actually felt to those living through them, written by someone with both the analytical rigor to dissect complex market dynamics and the pattern recognition to identify which trends would endure.

What makes Gurley's analysis particularly valuable is his ability to spot foundational shifts before they became conventional wisdom. He was writing about the power of network effects and increasing returns when most investors were still focused on traditional metrics. He identified the strategic importance of marketplaces when they were dismissed as simple intermediaries. He understood the implications of mobile before most companies had built their first iPhone app. His early recognition that "all markets are not created equal" helped define how we evaluate marketplace businesses today, while his warnings about unsustainable unit economics proved prophetic for countless startups that burned through capital without building viable business models.

Gurley's writing reveals how the smartest minds in technology were thinking about platform dynamics, competitive moats, and market structure as these concepts were being defined in real-time. For anyone trying to understand how we arrived at today's technology landscape, or seeking to identify similar patterns in emerging markets, Gurley's archive represents an unparalleled window back to the future.

Select Content:
Primum No Nocere: The Government Goes After Microsoft* (1994)
The Vertical Vortex: It's Not About Technology, It's About Context* (1998)
The New Face of Internet Competition* (1999)
All Revenue is Not Created Equal: The Keys to the 10X Revenue Club (2011)
How to Miss By a Mile: An Alternative Look at Uber’s Potential Market Size (2014)

Bill Gurley's Blog

If you want to read Bill’s early equity research faxes, email me.

Nomad Investment Partnership

In the Nomad letters, Nick Sleep and Qais Zakaria tell the same story on repeat — patience compounds, misalignment corrodes — yet each retelling feels fresh because they lace it with self-deprecating humor, a scholar’s footnotes, and the occasional Ferrari reference.

Nomad’s central argument was radical for its time: if you give customers the surplus instead of hoarding it, the flywheel spins faster and the runway lengthens. Amazon demonstrates the math, Costco shows the culture, and Nomad tries to own both. But the letters aren’t just an ode to beautiful business models. They’re a clinic on governance. Performance fees that claw back if results sag, a mandatory five-year horizon form, explicit warnings that “doing nothing” will often be the right call. Sleep doesn’t preach alignment; he contracts for it.

What Nomad hands you is a mental architecture: time arbitrage as the last durable edge, humility as risk control, and structure — fund, company, or personal life — built to survive the barren years that inevitably precede harvest. The Nomad letters were, and remain, a masterclass in patient capital allocation and principled investing.

Below is a "travel itinerary" for the Nomad letters:

Long-term thinking: Equity yield curve, the hidden cost of public commitments, and the moat made of temperament.
Misaligned incentives: growth-at-any-cost myths and the subtle art of strategic shrinking.
Business surgery: freeing the crown jewel, robustness ratios, and why superior performance is just many boring things done well.
Nomad mechanics: optimal fund size, reopening criteria, and that elephant-mouse paradox.
Other: selling too early, the index as costless but not riskless, and capitalism’s blind spot for slack.

Select Content:
Outstanding Investor Digest Interview (2003) - pg 42
Annual Letter for December 31st, 2004 (2004) - pg 45
So, how does Zeckhauser play bridge? (2005) - pg 80
Interim Letter for June 30th, 2007 (2007) - pg 115
Interim Letter for June 30th, 2009 (2009) - pg 156

Nomad Letters

James Anderson

Whereas Benjamin Graham urged investors to fear the cliff‑edge of mean reversion, James Anderson invites them to seek an entirely different landscape — one mapped by Santa Fe complexity science. His letters outline how data loops, network effects, and path‑dependence let a handful of companies sprint away from the average, rewriting the distribution of outcomes so dramatically that the "mean" itself drifts upward and loses explanatory power.

Anderson pins his own 95 Theses to the church door of Value, but with such warmth and cultural flair that it feels more like an invitation to dialogue, not a declaration of war. If Graham’s motto was “Margin of Safety,” Anderson’s counter‑slogan is “Margin of Upside.”

Anderson lingers on these technology outliers, from Microsoft compounding earnings 24 % for three decades (and counting!), and Facebook scaling users and profits faster than Coca‑Cola ever scaled its own addictive products. These "extremes," he argues, are not rounding errors but the principal drivers of aggregate market wealth in this new increasing returns regime. Follow the "(Brian) Arthur rules" rather than the "Graham rules," which were created for a fundamentally different world than the one we have today.

Governance, too, gets the Anderson treatment. Anderson lambasts quarterly‑obsessed asset managers and box‑checking “Governance” departments that impose one‑size‑fits‑all edicts on hyperscale innovators. True stewardship, he insists, is cultural: back founders who think in decades, sympathize when the inevitable “13 nasty weeks” arrive, and applaud moon‑shots even when they miss. In short, reclaim activism for long-term builders, not for hedge‑fund arbitrageurs.

Beneath all the iconoclastic ideas and rhetorical flourish, Anderson presents a disciplined toolkit: map scenarios, assign probabilities instead of single-point forecasts, accept deep uncertainty, and let optionality and long-term compounding do the heavy lifting.

Select Content:
Manager’s Review — Annual Report (2009) - pg 15
Confessions of an Unreformed Optimist (2010) - pg 114
Manager’s Review — Annual Report (2014) - pg 34
The Managers’ Core Investment Beliefs (2012, 2014-2021)
Graham or Growth (2019) - pg 148

James Anderson Compilation

If you have James’ letters from 2000-2005, 2007, or 2013 and can share them, please email me!

Dynamo

"Dynamo is a partnership, where all partners are involved in our only activity, and that is managing the funds. All of our back office activity (custody, settlement, NAV calculations, cash management and accounting) is outsourced. Besides that, the majority of the partners' wealth is invested in Dynamo administered funds. We do not have an investment approach that differs from the one that is offered to our clients."

Today, the firm’s structure remains refreshingly lean — research at the core, administration rented from specialists, every partner’s net worth lashed to the same mast as Cougar’s shareholders.

From the early discussion on competitive advantages in fund management, through complexity-science detours, to platform economics deep dives, Dynamo’s letters show an organization willing to flow when the environment demands it — without losing the core kernel of its philosophy. That combination of intellectual restlessness and structural stillness is rare.

It is also essential.

Markets evolve in punctuated bursts, with investors who refuse to revise mental models becoming irrelevant. Conversely, firms that chase every fad lose the compounding that only consistency delivers.

Dynamo solves that paradox by releasing its curiosity inside a rules-based discipline: value the business, ignore the crowd, own it long enough for fundamentals to triumph.

Select Content:
#39: Ten Years (2003)
#55-56: The Order of Complexity - Complexity in Action (2007)
#97-98: Mutate in Melius - Melius Cras (2018)
#99-100: Beginnings and Principles - Continuation (2018)
#119-120: CEOs: The Floor is Yours I & II (2023)

Dynamo Letters

If you have Dynamo’s first 23 letters and can share them, please email me!

Bill Miller

Informational, analytical, and behavioral advantage are the three competitive advantages in investing.

Long before the investment world fully appreciated the profound market inefficiencies created by human psychology, before behavioral finance entered mainstream thinking, there existed a remarkable collection of quarterly letters that quietly chronicled one of the most sophisticated investment minds of the modern era. Written by Bill Miller during his legendary tenure managing the Legg Mason Value Trust, these commentaries transcend mere market observations — they represent a comprehensive real-time documentation of how disciplined contrarian thinking and rigorous analytical frameworks can generate sustained outperformance across radically different market environments.

It is striking how often Miller was early to ideas that later became conventional wisdom. He was buying technology companies when value investors thought tech was uninvestable. He understood Amazon's business model when everyone else saw an overvalued bookstore. He grasped that markets are complex adaptive systems, not equilibrium-seeking machines.

He beat the market for 15 years running, lost it all, and then made it all back (and more) in just two investments.

Select Content:
New Economic Thinking (1993) - pg 241
The Value Trust — The 1990s (2001) - pg 100
Sources of Edge (2006) - pg 234
4th Quarter Commentary (2006) - pg 162
“Certitude is not a test of certainty. We have been cocksure of many things that were not so.” — Oliver Wendell Holmes (2017) - pg 315

Bill Miller Compilation

If you have Bill’s letters from 1990-1995 and can share them, please email me!

Bonus Compilations

If you’ve gotten through all five of these compilations, and want more, check out these compilations on Michael Mauboussin and Josh Wolfe, who are also both affiliated with the Santa Fe Institute.

Michael Mauboussin Archive

Josh Wolfe Compilation

And if you’d like to “chat” with Michael Mauboussin, you can do so here:

Chat with Michael Mauboussin

Letters in this Newsletter

Individuals affiliated with the Santa Fe Institute have been frequently featured in this newsletter. See the below list for the SFI Trustees who have been featured.

If you got this far and you liked this piece, please consider tapping the ❤️ above or sharing this letter! It helps me understand which types of letters you like best and helps me choose which ones to share in the future. Thank you!

Wrap-up

If you’ve got any thoughts, questions, or feedback, please drop either of us a line — we’d love to chat! You can find us on Twitter at @kevg1412 and @nicholasachow, Kevin’s email at kevin@12mv2.com, or Nick’s LinkedIn here.

If you're a fan of business or technology in general, please check out some of our other projects!

Speedwell Research — Comprehensive research on great public companies including Constellation Software, Floor & Decor, Meta (Facebook) and interesting new frameworks like the Consumer’s Hierarchy of Preferences.
Point in Time — Musings on code, capital, and craft.