Investing is a practice where one is rewarded for understanding the world. There is no one way that works. If there were, everyone would follow the grand unified theory of investing and markets would be perfectly efficient. Instead, we look at where markets intersect with both the laws of physics and human behavior. We study what changes over time and what doesn’t. The development of a thesis isn’t about developing a strict set of rules that one must follow to a t, but to codify a framework, a way of thinking, that serves as a lens through which to try to understand the world, how it has changed through history, and how it may change in the future.
In our experience, the best investments are found when we are in search of the inevitable. It is of course far easier to look back in hindsight and say “it was inevitable that so and so happened” but the exercise of understanding patterns of history and how the forces of scientific discoveries, technological breakthroughs and human behavior collide to drive both innovation and economic growth is essential in building a coherent framework through which to view the world and its many possible futures. History shows us that major economic and technological waves emerge when a constraint gives way or when a major threshold is crossed. Entire new classes of companies and markets can become possible when a physical, computational, or informational bottleneck is broken.
Studying the past allows us to gather many examples and compare similarities in an attempt to build a general framework from the common patterns. There is, of course, no way to know how exactly the future will unfold. So any declaration of “it is inevitable that…” comes with the understanding that there’s a high degree of uncertainty in any prediction about the future. Markets (and reality) are chaotic, random and far from deterministic. Rather than pretending we have a crystal ball in our search for the inevitable, we treat our theses like a scientific hypothesis. Something to be tested against real world evidence and updated as we gather new data.
The origin of this thesis and the name Inevitability Research come from my personal experience with investing. It was 2015, I was in college and had just signed up for a Robinhood account to invest the money I had earned over the previous summer. A physics major, I had been interested in how frontiers of technology became commercialized as businesses. Frustrated by Boston traffic and impressed with Uber’s meteoric success, my curiosity led me down a rabbit hole about self driving cars. I, in my young naivety, became convinced that self driving cars were not just possible; but inevitable. We were inevitably going to build these things. Inevitably, a tremendous amount of capital was going to be invested in making this a reality. I learned about the different technologies involved and the various bottlenecks that would have to be solved in order to bring this dream to fruition. This led me to computer vision and GPUs and the thesis that the company that stood to benefit from this inevitable future was Nvidia. This framework also led to investments in AMD, ASML, Taiwan Semiconductor and Tesla.
The thesis that AI training was inevitably bottlenecked by networking technology led to investments in Arista, Broadcom and Google, as it led to a deep dive on their TPUs and custom data center design that we explored in this piece about the future of networking. AI training was also bottlenecked by the amount of data centers, which led us to Celestica. The thesis that the best luxury companies would continue to be able to compound the value of their storied heritage led to LVMH, Hermes and Ferrari as we explored in Compounding Heritage. An exploration of inevitabilities in a post ChatGPT world led to our piece of Hyperindividualization.
I’m also always looking for historical examples that follow similar patterns. A useful exercise is to write a simple statement and then work backward to understand the dynamics that made it true. For instance: “In hindsight, it was inevitable that once we understood the unification of electricity and magnetism, we would seek to use electricity to power devices, beginning with light.” From there, we can analyze what bottlenecks had to be overcome and what thresholds were crossed to make that progress possible. Engines That Move Markets is a fantastic book that explores various technological breakthroughs, their commercialization and the financial bubble that almost always followed.
As I tried to understand history in terms of inevitabilities following scientific discovery and technological breakthroughs, what I noticed was that while it was a useful exercise to understand history through the lens of inevitabilities, a more repeatable process (and one more applicable to investing) would be identifying bottlenecks that were constraining progress and thresholds that once crossed, could unlock new companies and markets.
For example, in the case of electricity, the economy in the late nineteenth century was bottlenecked by the lack of consistent, cheap illumination. Once the threshold of industrial-scale electricity generation and distribution was crossed, entire industries reorganized around artificial light.
The semiconductor industry is perhaps the purest example of inevitability expressed through physics. For decades, Moore’s Law served as both an observation and a challenge: that transistor density, and therefore computational power, would double roughly every two years. Each generation faced its own bottlenecks in materials, heat, and fabrication, but engineers repeatedly crossed those thresholds through innovation in lithography, chip design, and process technology. Each breakthrough continued to shrink transistors, expanded what was computationally possible and opened entirely new markets, from personal computing to internet and software companies to the modern AI companies today.
Once organizations depended on software and accessing the internet became common in most people’s daily lives, computing itself became bottlenecked by physical infrastructure. Scaling required capital-intensive servers, space, and maintenance. Google, for instance, quickly required more computing power than was available at Stanford. The threshold was crossed when virtualization and elastic compute made it possible to rent computation the way one might draw power from a grid. Cloud computing basically inverted the main constraint facing companies needing compute and storage resources, turning infrastructure from a bottleneck into a catalyst. The next generation of startups was built atop the newfound abundance created by cloud computing. Netflix is a perfect example of a company that was possible now that the bottleneck of needing on prem resources was solved. Snowflake is another example. They uniquely understood that the next generation of data applications was bottlenecked by compute and storage being aggregated.
The same logic applies to modern technology. In the case of Instagram, the founders recognized that mobile applications were bottlenecked by slow cellular networks. Early investors doubted that phones could handle a feed of images on 3G connections, but the founders understood that the threshold would be crossed as networks evolved to 4G and beyond. The same framework could have led one to anticipate that video-first platforms like TikTok would become inevitable once 5G removed bandwidth as a bottleneck.
Studying history makes it apparent that it is essential for the investor in search of the inevitable to spend some time at the frontiers of science and technology. It may have been inevitable to the AI research community that a new era was under way upon reading “Attention Is All You Need” in 2017. It certainly seemed inevitable after the launch of ChatGPT. It seemed inevitable to many early believers that Bitcoin would play an increasingly important role in the global financial markets, and appreciate significantly in value. Growth, new companies and business models and even entirely new markets themselves are downstream of innovation at the frontiers.
Something I learned from studying Nvidia, and later Apple, is that this lens can also be applied to understanding how a founder or CEO sees the world. For Jensen Huang, it was inevitable that customers would want better graphics for video games. The bottleneck was chip design, not demand, and nothing in the laws of physics prevented him from building a processor optimized for graphics workloads. Another example of him betting Nvidia’s future on his view of the inevitable was investing heavily in developing CUDA for scientific computing, which later became the foundation for training deep learning models on GPUs.
Steve Jobs is perhaps the best example of someone who took a definite view of where technology was heading in the future and made it inevitable by building it. Some may have seen Doug Engelbart’s presentation (now titled “The Mother of All Demos”) as just a fun idea of how to use a computer. Many (including Xerox’s management!) dismissed personal computing as too niche to ever catch on, especially compared to the enterprise opportunity. But Jobs saw this future as inevitable and understood that building an operating system that encourages easy and standardized application development, as well as access to networking were the main bottlenecks in creating a device that was simple for the average person to use (which he did, perhaps ironically, during his time at NeXT.)
This is to say, ideally, a founder is building towards what they believe to be an inevitable future. Jensen couldn’t imagine a world without better graphics chips, Jobs without personal computers. Elon believes that for the survival of the human race, it’s inevitable that we become a multi planetary species and that we’d need to be able to reuse rockets that we send into space for various missions. Jeff Bezos saw the inevitability of e-commerce but also offered a crucial viewpoint in terms of how to view possible futures. Instead of trying to predict what would change in the future, he focused on what would not change. For instance, customers would always want to receive their packages sooner, have a wider selection of products at competitive prices, have access to free shipping etc. The common thread being the founders making a bet based on a future they see to be inevitable, and then attacking a bottleneck or threshold that brings them closer to that future.
This piece has mainly discussed our framework in terms of technology investments, which is where I spend a lot of my time. Of course, the stage at which an investment is made informs how tightly the numbers and the story are intertwined. The earlier the stage, the less tangible the numbers are and the more the thesis depends on narrative potential: the story of the bottleneck, how it will be solved, and what will be unlocked once it is.
We are, however, firm believers that this framework is applicable across sectors and stages, and across both public and private markets. Mature companies can unlock growth by identifying and navigating bottlenecks, and when important thresholds are crossed. In fact, the future of an established company can be more inevitable than that of one poised for hypergrowth. A useful way for gauging the inevitability of a more mature company is to try to understand what it would take to compete with them. Warren Buffet once said you could give him all the money in the world and it wouldn’t be enough to compete with Coca-Cola when explaining his thesis for the company. This is a helpful way for understanding the prospects of a more mature company. In the case of an acquisition, the bottlenecks may exist at the organizational level. Or recent thresholds may have enabled the company to enter new markets. Point being, we seek to make this framework generalizable to any and all investments.
A company’s ability to grow revenue, generate cash, reinvest capital at a high rate of return, and do so for a long period of time remains the foundation of any investment thesis. The importance of weighting towards story or numbers of course depends on the stage at which the investment is being made. It is always a balance and never an exact science.
“Once this bottleneck is solved, we can grow by X, improve our margins by Y, or open up a market worth Z that doesn’t currently exist.”
A key component of the work we are doing is the ability to adapt and evolve. If we were to rethink the job of an investor from first principles, it would be obvious that one should have the flexibility to invest across sector,stage and market; wherever bottlenecks are breaking or thresholds are about to be crossed and inevitabilities begin to reveal themselves.
How then, can one navigate the frontiers and later stages fluently, efficiently, and most important, profitably? Curiosity and discipline. Being a student of history and being able to imagine possible futures. Being able to triangulate viewpoints and information amongst people who deeply understand and are well versed in the topic of interest. This part is especially key and one of the many reasons that I find X dot com formerly Twitter to be an invaluable resource. You are one tweet or dm away from the foremost experts on nearly any subject in the world. Sure, there is a lot of noise, but one insightful conversation full of substance is worth all the noise in the world. In that sense, it’s the ultimate “expert network.” This is key for the investor in search of the inevitable because there is no way to stay on top of everything yourself. Seeking meaningful relationships and valuable conversations is integral to this pursuit.
As investors, we’re trying to understand the possible futures and do our best to come up with falsifiable hypotheses about them. Understanding history plays an important role in developing our framework. When discussing investment opportunities with founders and management team, this kind of framing can be useful to understand their thinking.
“In the future, it is inevitable that…” Their answer will offer lots of color about how they view their world and their company’s place in it.
“What needs to happen for your success to be inevitable?” This helps understand the possible bottlenecks and/or thresholds that need to be solved or overcome in order for the company to succeed and grow in a way that offers significant return on investment.
Inevitability, to us, is not about prophecy but about curiosity, discipline and process. The goal is not to predict the future. It is in the search for the inevitable that we identify bottlenecks and thresholds that present interesting investment opportunities.
This essay serves as the foundation of how we think at Inevitability Research. The ideas here will evolve, as all good hypotheses do, but the goal will remain the same: to understand where constraints are breaking, where thresholds are near, and where the future is quietly becoming inevitable.
If you’re building or investing where a bottleneck is breaking or a threshold is near, my DMs are always open.
Very interesting piece, you might like some of the work of Carliss Y. Baldwin on bottlenecks. Her primer that is freely available ("Bottlenecks, Modules and Dynamic Architectural Capabilities") might be a good start, where she distinguishes between technical and strategic bottlenecks, and that it is important not only to solve the bottleneck, but also to be in control of the resource that solves it for value capture.
This is a valuable piece of art and a clear indicator of where to direct your investment for the highest possible return.
Keep up the great work.