A quick trivia moment reveals that 'boring' catalog chipmaker Texas Instruments has higher operating margins than Microsoft, underscoring how underappreciated some semiconductor businesses are.

TI has higher operating margins than Microsoft despite being viewed as an 'old economy' chipmaker
Two-thirds of TI's end markets are industrial and automotive, not leading-edge digital
'Boring is beautiful' — TI deliberately walked away from leading-edge digital chip business

“here's a good trivia question. Who has higher operating margins? Texas Instruments or Microsoft? Right? Because I ask it, you know the answer is is…”
Brent/Brinton · 1:33:30

#Texas Instruments#Microsoft#margins#trivia

Hot Take· 1

Hot Take41:30

Conviction Is Just a Synonym for Overconfidence

NZS argues that the investing world's obsession with 'high conviction' ideas is actually a euphemism for bias and sunk cost, and describes how the team culturally rewards admitting uncertainty and being called out.

'Conviction' often just means sunk cost plus overconfidence in one's own view of the future
NZS team culture explicitly encourages calling out each other's bias
Documenting reasoning ('key leverage points') makes it easier to catch drift later
It's fine to hold optionality positions with low conviction if the payoff is large enough

“I mean, we use conviction as a synonym for overconfidence.”
Brent/Brinton · 41:30

“Conviction for us means, hey, I've done a ton of work, so I've got a lot of sunk cost, which means I've got bias, and…”
Brent/Brinton · 42:00

#bias#conviction#team culture#overconfidence

Explainer· 5

Explainer19:00

Why NZS Avoids 'Moat' Companies That Extract Too Much Customer Value

NZS explains why the firm's name reflects a 'non-zero-sum' philosophy, avoiding businesses that use competitive moats to extract maximum value from customers or partners, using Apple's App Store as a cautionary example.

NZS is wary of 'moats' used to lock in customers and then raise prices
Firm name NZS stands for 'non-zero sumness' — win-win for all constituencies
Apple's App Store take rate cited as an example of excessive value capture
Leaving money on the table for partners can increase long-term resilience

“the reason um we named the firm NZS Capital is we're looking for non-zero sumness.”
John Bathgate · 20:00

“They're getting pretty good at value capture over there.”
Ben Gilbert · 20:30

#moats#non-zero-sum#Apple#value capture

Explainer24:00

Porter's 'Shared Value' U-Turn Validates Long-Term Thinking

The guests note that Michael Porter, of Porter's Five Forces fame, later published a paper on 'shared value,' arguing that creating value for all stakeholders is the economically optimal long-term strategy for shareholders.

Porter's five forces has often been misread as 'build a moat, then extract price'
In 2019 Porter wrote about 'shared value' in Institutional Investor
The argument is economic, not just ethical — shared value maximizes long-term shareholder returns
Porter had also consulted for Intel during the ARM disruption of mobile chips

“he actually revised his thinking and in in 2019 wrote a paper in in Institutional Investor called where SG where ESG fails, where he talked…”
Ben Gilbert · 24:00

“he's literally making an economic argument for shareholders that that's the long-term value maximizing thing to do, right?”
Ben Gilbert · 24:30

#Michael Porter#shared value#ESG#strategy

Explainer1:15:00

Samsung vs. TSMC: Different Business Models, Different Trust

John explains how Samsung dominates DRAM and NAND memory while TSMC leads in logic/foundry, and why TSMC's pure-play neutrality creates more customer trust than Samsung's vertically integrated model.

Samsung has ~50% market share in DRAM and ~33% in NAND flash
Only three major companies make DRAM globally: two in Korea, one (Micron) in the US
Logic/system-on-chip manufacturing (TSMC's specialty) is harder than memory manufacturing
Samsung competes with its own foundry customers, creating trust issues TSMC doesn't have

“Samsung is very good at making memory and like I said, they have over half of of the market share in DRAM, which is incredible.”
Brent/Brinton · 1:16:00

“Samsung is also doing logic, but but it's they have a different business model, right? They compete with their customers, so it's harder for their…”
John Bathgate · 1:17:00

#Samsung#TSMC#memory#foundry

Explainer1:22:00

The Semiconductor Ecosystem as a 'Superorganism'

Brent frames the roughly 15 critical companies in the semiconductor supply chain (TSMC, ASML, Lam, AMAT, KLA, etc.) as functioning like a single superorganism whose combined value and importance exceeds any individual company.

TSMC is far less valuable without ASML, Lam, Applied Materials, and KLA, and vice versa
NZS applies its complex-adaptive-systems lens to the whole semiconductor value chain
Recreating this ecosystem elsewhere would take many years even with full technical access

“There are this handful of companies called 15-ish, maybe more that if you think of them as one super company, which is kind of what…”
Brent/Brinton · 1:22:30

#semiconductor ecosystem#ASML#supply chain#complex systems

Explainer1:28:30

Is Moore's Law Still Alive? Chiplets, Packaging, and Beyond

John lays out why the 'spirit' of Moore's Law has visibility for another 10-15 years through EUV lithography, gate-all-around transistors, chiplets, and advanced packaging, even as the pure transistor-scaling narrative is debated.

ASML believes EUV lithography can drive transistor shrink for about 15 years
'More than Moore' — gains increasingly come from packaging and chiplets, not just transistor density
Industry moving to gate-all-around transistor architecture at 2nm/3nm nodes
System-level innovation (multi-chip clusters, proprietary interconnects) is now central to performance gains

“I think just like for the spirit of Moore's Law, we still have we have visibility probably for the next 10 to 15 years.”
John Bathgate · 1:28:30

“it's not just about the transistor. It's really about kind of the um the package.”
John Bathgate · 1:30:00

#Moore's Law#EUV#chiplets#packaging

Story· 3

Story07:30

How NZS Capital Discovered Complexity Theory at Santa Fe Institute

Brent and John describe how reading 'The Origin of Wealth' and 'Complexity' led them to become members of the Santa Fe Institute's action group and take complexity courses at Stanford.

Firm's philosophy came out of investing 'pain' and being wrong a lot
Two founders independently read 'Origin of Wealth' and 'Complexity' around the same time
They became members of the Santa Fe Institute's non-scientist 'action group'
A weekend Stanford course with ant researcher Deborah Gordon sparked the resilience concept

“We quickly became members of the Santa Fe Institute. They call it the action group.”
Brent/Brinton · 10:30

#complexity theory#Santa Fe Institute#origin story

Story1:44:00

How the Industry Bailed Out ASML to Save EUV Lithography

John recounts how Intel, TSMC, and Samsung jointly bought 25% of a then-obscure ASML around 2012 to fund development of EUV lithography, a move that ultimately secured Moore's Law's continuation.

ASML was a relatively unknown, ~$20B market cap Dutch company around 2012
Intel, TSMC, and Samsung invested together to fund EUV development
EUV took nearly a decade of iteration (first shipped 2010, high-volume manufacturing by 2019) before becoming production-ready
The three companies have since largely divested their ASML stakes

“Intel and TSMC and Samsung partnered and actually bought 25% of ASML to inject capital into ASML to develop EUV systems.”
John Bathgate · 1:44:30

#ASML#EUV#industry cooperation#history

Story1:10:00

The (Joking) Alien Origin Story of the Transistor

A playful bit riffing on the idea that semiconductor technology seems so mind-blowing it could have come from a UFO crash, used as a lighthearted intro to the real history of the transistor at Bell Labs.

Joking framing: semiconductors 'arrived' via a UFO crash before being reverse-engineered at Bell Labs
Real history: William Shockley, John Bardain, and Walter Brattain discovered solid-state switching via doped germanium
Solid-state switching later enabled the integrated circuit via Jack Kilby at TI
The book 'The Idea Factory' recommended for Bell Labs history

“we know exactly when semiconductors came to planet Earth. It was July 7th, 1947.”
Brent/Brinton · 1:10:00

#transistor history#Bell Labs#Shockley#semiconductor origins

Q&A· 1

Q&A1:19:30

How NZS Thinks About Taiwan Geopolitical Risk to TSMC

David presses Brent and John on how they weigh the risk of China-Taiwan conflict to TSMC, and the team discusses TSMC's outsized importance to the global economy and possible portfolio hedges.

TSMC fabricates about a quarter of the world's digital chips
NZS considers TSMC more important to the world economy than Apple
A Taiwan conflict would likely tank the broader market, not just TSMC, limiting the value of isolated hedges
Possible partial hedges discussed: defense stocks, semiconductor capital equipment makers

“I think TSMC is more important than Apple.”
John Bathgate · 1:20:30

“I mean TSMC fabs a quarter of the digital chips made in the world right now”
John Bathgate · 1:21:30

#TSMC#geopolitics#Taiwan#risk management

Takeaway· 1

Takeaway1:52:00

Why 'Governed Growth' Beats Hypergrowth Long-Term

Closing discussion on how a natural 'governor' on growth — like ASML's manufacturing capacity limits or TSMC's discipline in not overcharging customers — creates the kind of steady, multi-decade compounding NZS prizes over unsustainable hypergrowth.

A 'negative feedback loop' (a natural constraint) prevents unsustainable 100% growth but enables steady multi-decade growth
TSMC reportedly compounded around 17.7% growth for roughly 30 years
ASML's inability to ship more than it can manufacture acts as a natural growth governor
Long, flat compounding rates ultimately outperform short bursts of hypergrowth

“So there is a governor on the growth.”
Brent/Brinton · 1:53:00

“But then the more it happens, eventually there's a game theory to it. Everybody has to do that eventually cuz it works so much better.…”
Brent/Brinton · 1:52:30

#compounding#growth rate#negative feedback loop#TSMC

Frameworks in this episode

Complexity-Driven Resilience Mental Model

Non-Ergodic Power Law Investing (Slugging Percentage)

Non-Linear Unstructured Research Time

Resilience & Optionality Barbell Portfolio

Insights & moments

⚡Myth Buster· 1

Surprising Trivia: Texas Instruments' Margins Beat Microsoft's

◆Hot Take· 1