Earlier this week we talked about freedom. Tension, disagreement, and visibility are uncomfortable signs of resilience, not decay. In free systems, conflict doesn’t mean collapse. It means course correction is still possible. We hope for this at Somerset. 

That’s what makes the system worth trusting. That’s the yellow bicycle: the thing we forget to look for while we focus on efficiency.

As someone who raises and manages capital for a living, the rise of passive investing has been one of the great modern efficiencies that troubles me to the soul level. Index funds have lowered costs, increased access, and delivered returns that most active managers would struggle to beat over time. That part is clear.

What’s less clear, and needs to be said out loud, is how easy it becomes to stop choosing. Remember from part one this is not ideal. 

When everything is owned, nothing is scrutinized. When a portfolio mirrors an entire market, it stops reflecting a point of view. When capital flows without discernment, it begins to drift. In both performance and purpose. 

I’ve started to notice it in myself: the internal flinch when I hear “the market gets what the market gets.” That phrase sounds like wisdom. It sounds neutral. It isn’t.

This is an invitation to disconnect. It is a surrender of judgment. Over time, it starts to feel like the socialization of capital. A concept we have explored together for years, and there are “yellow bicycle” potential risks that I can’t stop thinking about as an allocator. 

We live in a system built on the freedom to choose. That freedom is what allowed markets to evolve in the first place. We’ve created an investing culture that, at times, feels allergic to choice. As if discernment itself has become an inefficiency.

I don’t have a tidy answer. I do have a strong instinct. Resilient systems depend on feedback. Durable portfolios do, too. There is a kind of choosing that doesn’t always show up in performance reports. It shows up when the wind changes. When volatility returns. When leadership shifts. When policy overreaches.

Discernment won’t beat the market every quarter.  

We may arrive early and we pray we don’t arrive too late. At Somerset, we hope we are helping our clients hold on to what made the market worth trusting in the first place, and in our own little way I hope we can be part of protecting it.