Impostors, more private markets, and why AI writing sucks
A little reading from the past week (click the title for the link to the original story).
BlackRock Slashed Private Loan Value From 100 to Zero
“How did you go bankrupt?” Bill asked.
“Two ways,” Mike said. “Gradually and then suddenly.”
-Ernest Hemingway
BlackRock Inc. slashed the value of a private loan to zero at the end of 2025, just three months after assessing it at 100 cents on the dollar, marking the second sudden wipeout to recently hit its private-credit division.
“While a small loan in a troubled niche, its abrupt markdown highlights what critics describe as a key fault line in private credit: the lag between valuations on illiquid loans and the deteriorating performance of the companies behind them. Zips Car Wash was valued near par by its private credit backers in the months before it sought bankruptcy protection. And in November, BlackRock TCP slashed the full value of loans it extended to Renovo Home Partners, a struggling home improvement company.”
I wrote an entire chapter in Low Risk Rules about how private funds hide volatility. It’s an idea I keep coming back to here as well, particularly because it has become so timely. The book came out 4 years ago when private funds were all the rage, but this outcome seemed inevitable, only because we’ve seen it before.
This isn’t a blanket criticism of private funds. Rather, it’s about how they are marketed as “uncorrelated” and “low volatility.” If you’re not marking something to market every day, of course it will be uncorrelated and low vol. But then stuff like this happens, and it serves as a wake up call. Unfortunately for too many investors and advisors, it’s too late.
The Music Has Stopped in Private Markets
Semi-liquid private market funds suffer many flaws, but the most egregious is that they violate one of finance’s oldest principles: never fund illiquid assets with redeemable claims unless a lender of last resort stands behind the structure. Private market managers have not only defied this principle, but they have also amplified the risk by selling these structures to individual investors, who historically are far more prone to run when conditions deteriorate.
What is interesting and often under-reported is that the supply chain does not operate in isolation. It is reinforced by a network of amplifiers that includes trade media, trade associations, and academia. These amplifiers often repeat the prevailing narrative that private markets provide superior returns and diversification benefits. When these messages are repeated across multiple trusted intermediaries, the overall system gains momentum and skepticism becomes increasingly rare.
The run on private markets will likely accelerate and spread. Many investors will be affected, and the process has only begun.
The Fake Cartier and the Fake Rockefeller
There are no keys. And there is no kingdom.
The wealthy are just as lost as the rest of us.
“If you think about it, the family office rules the world,” said Rachel. “They are our most generous benefactors — they’re the ones who support funding for biotech or robotics.” Family offices control an estimated $5.5 trillion of capital, ranking them with Wall Street’s biggest banks. But in the financial world, they’re often the butt of jokes. There are notable exceptions, yet overall, family offices have a reputation for being somewhat unsophisticated — a sort of dumber money. Many of them make investments based on the whims of one very rich dude or, worse, the whims of his children who have no business experience or financial acumen of their own.
A joke among family offices goes, “You have a family, you have an office, you have a family office.” In other words, there are few specific qualifications or regulatory requirements for setting one up, making them both a potentially easy target for cons as well as ripe for fakers. When I spoke with people in the industry, many wanted to warn me about a roster of unscrupulous characters they believed to be scamming family offices.
Bartzen’s professional life, however, was blossoming. She started landing speaking gigs in front of high-net-worth audiences. In May, she spoke on a panel at a Family Office Club summit in New York, where she was touted as an “angel investor.” “She said she was an angel investor and not raising capital, and we had no reason not to believe her,” said Richard Wilson, president and founder of the Family Office Club. She told many people on the party circuit that she’d been the “mastermind” behind the launch of several blockbuster drugs on the market, including Botox and the Merck cancer drug Keytruda.
Infinite midwit
I get a market update newsletter every morning, and over the years I have noticed that it has been afflicted by the insidious creep of “AI speak.” It’s a “free” newsletter for clients of this particular firm, but what you don’t pay in money, you pay in time. And I always get annoyed when I find myself reading something that was obviously put togehter by AI. If you as a writer can’t be bothered to write the words, why do you expect your readers to spend their precious time reading it?
It’s cool that AI can fold proteins, create websites, fact-check journal articles, etc. but it can’t write anything that I am interested in reading. The problem isn’t that it hallucinates or makes mistakes. It’s that everything it writes vaguely sucks. I drag my eyes across the words and I feel nothing. That’s not quite right, actually—I feel like, “I would like this to be over as soon as possible.” When I see the ideas that the machines think are insightful, I wince.
The computer doesn’t know any of this. It can’t know any of this. It can only read the cookbook; it can’t taste the meal. Objective knowledge can make your sentences true, but it can’t make them alive. Without access to subjective knowledge, you quickly hit a wall. And unlike all previous walls that AI has surmounted, you can’t overcome this one by scaling—either in the literal or metaphorical sense—because it’s a wall with a width you cannot describe and a height you cannot see.
As Montaigne put it back in 1580, “though we could become learned by other men’s learning, a man can never be wise but by his own wisdom”. What does it look like to have all the learning ever created, but no wisdom of your own?
Shuffle
And now for something completely different… (for real!)