Ch6 02: How a Small Investment Firm Used Speed as Its Only Competitive Weapon#

Every mature industry carries a set of beliefs that everyone accepts and nobody questions. Not because they’ve been rigorously tested and confirmed — but because they’ve been around so long that questioning them feels pointless. Even foolish.

These aren’t policies or regulations. Those are written down. These are subtler: implicit assumptions. The unspoken premises that shape how an industry thinks about itself, its customers, and its possibilities. They’re the invisible architecture of an industry’s collective mind.

And they’re almost always partially wrong.

When I launched VistaShares, my most recent venture, the ETF market looked like the last place a newcomer could crack. The industry was ruled by a handful of titans — BlackRock, Vanguard, State Street — managing trillions. Fees had been pushed to near zero. Every major asset class, sector, and geography was already blanketed by competing products. Analysts, competitors, even some of my own investors told me the same thing: the ETF market is mature. There’s no room left to innovate.

That diagnosis rested on a stack of implicit assumptions the whole industry shared:

Assumption one: the only way to differentiate ETFs is on cost. Since every ETF tracking the same index delivers the same return, the only competitive lever is the expense ratio. That leads to a race to zero — and the biggest players always win that race.

Assumption two: thematic investing is niche. ETFs organized around specific themes — instead of broad indices — are small, speculative, and only appeal to sophisticated investors.

Assumption three: the current distribution model is the only model. ETFs get sold through financial advisors and brokerage platforms. Direct-to-consumer doesn’t work for investment products.

Each assumption had been true at some point. None were still entirely true. And the gap between “was true” and “is true” was where the opportunity lived.

The first assumption — cost as the sole differentiator — was a creature of the index-tracking era. When every ETF in a category mirrors the same index, of course cost is the only variable. But that logic only holds if index-tracking is the only game. What if you could spot structural economic shifts — supercycles in energy transition, infrastructure spending, defense rearmament — and package investment products giving ordinary investors access to these themes? The differentiator wouldn’t be cost. It would be insight.

The second assumption — thematic as niche — was built on data from a period when thematic ETFs were poorly assembled and poorly marketed. The products were niche because they were designed to be niche. But the underlying hunger for theme-based investing was massive. Retail investors increasingly wanted to put money into ideas they understood and believed in — clean energy, artificial intelligence, reshoring — not abstract indices they couldn’t explain at dinner.

The third assumption — about distribution — was being eroded by technology in real time. Social media, content marketing, and direct digital platforms were opening channels to reach investors that simply didn’t exist five years earlier. The “advisor as gatekeeper” model was still dominant, but it was no longer the only way in.

Here’s what I find consistently true about implicit assumptions: they’re self-reinforcing. Once an industry swallows a set of assumptions, every decision, investment, and strategy gets stacked on top of them. The assumptions become the foundation. And because everything is built on the foundation, questioning it feels like threatening the entire building.

That’s why incumbents almost never challenge their own assumptions. It’s not stupidity or laziness. It’s structural. The people inside the industry have the most to lose from shaking the foundation — their careers, their expertise, their portfolios are all built on it. The outsiders have the least to lose and the most to gain.

This is the outsider advantage from Chapter 1, applied at the industry level. New entrants don’t carry the assumption baggage. They can spot the cracks that insiders have been trained to walk right past.

I want to hand you a method for systematically auditing the assumptions in your industry. I call it the Assumption Audit, and it runs five steps:

Step one: enumerate. List the ten to fifteen things “everyone knows” about your industry. Pricing norms, distribution channels, customer segments, product formats, competitive dynamics. Those are your candidates.

Step two: trace. For each assumption, dig up its origin. When was it established? What conditions existed? What technology was available? What regulations were in force? The goal is to separate the assumption from its context — to see it not as timeless truth, but as a product of specific historical conditions.

Step three: test. Ask: have those conditions changed? Has technology moved? Have regulations shifted? Have customer behaviors transformed? If the answer is yes — and for assumptions older than ten years, it almost always is — the assumption is living on borrowed time.

Step four: invert. Flip the assumption. If it says “customers need advisors to buy investment products,” the inversion is “customers can buy directly.” If it says “cost is the only differentiator,” the inversion is “insight is the differentiator.” Not every flip will pan out. But each one is worth investigating.

Step five: validate. Test the inverted assumption with minimal spend. A landing page. A manual service. A small pilot. You’re not trying to prove the inversion scales — you’re trying to prove it doesn’t not work. The bar is low, and the cost of testing is trivial against the potential upside.

The most dangerous assumptions aren’t the ones that are flat-out wrong. Those get exposed eventually because they produce visible failures. The most dangerous ones are mostly right but partially wrong — right enough to feel safe, wrong enough to create a blind spot. “The ETF market is mature” — mostly right. “Cost is the only differentiator” — mostly right. “Thematic is niche” — mostly right.

But “mostly right” in a market worth trillions means the “partially wrong” slice represents a massive opportunity. And because everyone agrees on the “mostly right” part, nobody’s looking at the “partially wrong” part.

That’s where VistaShares lives. And that’s probably where the next disruption in your industry is hiding too.

Guidance#

Run an assumption audit on your own industry. Block an hour. Grab a whiteboard. Answer these questions:

  1. What are the ten things “everyone in our industry agrees on”? Write them all down. Include the ones so obvious they barely seem worth mentioning — those are often the biggest.

  2. For each, ask: when was this established? What’s changed since? Is the evidence still current, or is it legacy?

  3. Pick the two or three assumptions that feel most fragile — oldest evidence, biggest technology shift, highest customer frustration.

  4. Invert each one. Write down what the world looks like if the assumption is false. Opportunity or threat?

  5. Design a minimum-cost test for the most promising inversion. What do you need to learn, and what’s the cheapest way to learn it?

The biggest opportunities don’t come from analyzing markets. They come from analyzing the assumptions that define markets — and discovering that some of those assumptions have expired.