Oct 22, 2025 · 1h 38m · cheeky-pint
Dan Sundheim of D1 Capital on the art of public market investing
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D1 Capital Partners founder Dan Sundheim joins John Collison and Daniel Gross to deconstruct his fundamental investing philosophy, trading mechanics, and portfolio construction strategies across public and private markets. Through candid case studies spanning GameStop, Netflix, Rolls-Royce, and SpaceX, Sundheim explores risk management, business moats, and the structural advantages of remaining private.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. John holds 15% of the talking time here. How this is scored →
John as informed peer 5.4 Guest teaching 4.8 Guest disagreement 1.7 John pushing back 2.9
speaking balance: gold is John, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 12:02 Sundheim refutes the water-cooler legend
Sundheim bluntly rejects Gross's premise that firm alpha stemmed from off-the-cuff water-cooler recommendations, stating those were Gross's words and that fast intuition without deep due diligence has a terrible hit rate.
Hardest push from John ▶ 21:32 Collison challenges long-term horizon claims against short-term incentivesCollison directly pushes back on Sundheim's 3-year fundamental framing by pointing out the principal-agent conflict created by quarterly LP scrutiny and weekly mock portfolio reviews.
Biggest teaching moment ▶ 32:45 Sundheim redefines risk management fundamentalsSundheim educates the hosts on why cutting losses after an adverse move is not risk management but capital destruction, explaining that true risk mitigation must occur via upfront sizing.
John holds their own ▶ 1:37:00 Collison analyzes Buffett's unpolished early partnership lettersCollison showcases granular historical knowledge by comparing Buffett's folksy corporate Berkshire persona with his raw, ambitious 1950s partnership memos.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | John as informed peer | Guest teaching | Guest disagreement | John pushing back | Why |
|---|---|---|---|---|---|---|
| Execution Mechanics, Decision Authority, and the Investment Memo Process | 4 | 4 | 1 | 2 | John Collison and Daniel Gross ask practical operational questions about execution mechanics and decision authority. Dan Sundheim explains that he controls 90-95% of trades and clarifies that public market positions are initiated well before memos are finalized. | |
| D1 Capital's Investment Strategy, Fundamental Analysis, and Exit Multiples | 6 | 4 | 2 | 4 | Collison challenges Sundheim on whether private markets remain truly one-way doors given modern secondary liquidity and contrasts D1's disciplined target prices with perpetual buy-and-hold investors. Sundheim emphasizes that selling top performers early due to faulty exit multiple assumptions is the costliest recurring error. | |
| Case Study on Netflix: Fixed-Cost Moats and Selling Winners Early | 6 | 5 | 1 | 2 | Collison articulates why Netflix looked contrarian in 2018 due to cash-burn skepticism, while Sundheim breaks down how massive upfront content spend functioned as a heavy fixed-cost moat. Sundheim openly admits his biggest mistake was selling Netflix premature to full value realization due to internal analyst transitions. | |
| Intuition, Pattern Recognition, and the Limits of Water-Cooler Takes | 4 | 5 | 3 | 2 | Gross brings up industry lore about Sundheim driving outsized firm returns from casual water-cooler remarks, which Sundheim immediately deflects and reframes as unscientific and dangerous. Sundheim explains that while fast pattern recognition exists, relying on off-the-cuff takes yields a substantially lower hit rate than thorough fundamental research. | |
| Analyst Recruitment, Development, and Weekly Mock Portfolios | 5 | 5 | 2 | 3 | Sundheim outlines why D1 strictly hires analysts from private equity rather than lateral public hedge fund portfolio managers, citing the difficulty of breaking ingrained bad habits. He also details their weekly mock portfolio accountability system where analysts must explicitly track virtual allocations. | |
| Position Sizing Artistry, Asymmetric Bets, and Time Horizon Management | 7 | 4 | 2 | 6 | Collison mounts a sharp structural challenge, pointing out a principal-agent conflict where D1 claims a 3-year horizon but grades analysts weekly and manages LP quarterly volatility expectations. Sundheim counters by explaining the portfolio as an overlapping conveyor belt of planting and harvesting cycles. | |
| The January 2021 GameStop Short Squeeze and Market Stress | 5 | 4 | 1 | 2 | Gross and Collison prompt Sundheim to recount the firm's most painful crisis during the January 2021 meme stock squeeze. Sundheim describes the psychological shock of non-fundamental 400% moves driven by retail coordination and explains why he had to cover at the bottom purely to protect the firm from systemic ruin. | |
| Reinventing Short Risk Management and Portfolio Diversification | 6 | 6 | 3 | 3 | Sundheim delivers a masterclass in short risk management, arguing that post-facto stops are capital destruction and that sizing before the trade is the only real risk mitigation. He explains why expanding from eight concentrated shorts to forty diversified positions generated equal or superior alpha without blowup risk. | |
| Short Archetypes, Secular Decline, and Avoiding Derivatives | 5 | 6 | 2 | 2 | Sundheim categorizes short opportunities into retail story stocks, terminal secular decliners, share donors, and cyclical over-earners. He explicitly explains why D1 avoids derivatives, noting that paying for implied volatility and fixed time horizons conflicts with fundamental investing. | |
| The Rolls-Royce Turnaround and European Market Inefficiencies | 6 | 6 | 2 | 4 | Collison asks how D1 gained conviction in the turnaround of Rolls-Royce when turnaround narratives are ubiquitous across struggling industrials. Sundheim explains that European equity markets are far slower and laggier at recognizing operational turnarounds than efficient US markets. | |
| 3 AM Earnings Calls, Global Time Zones, and After-Hours Liquidity | 4 | 4 | 1 | 1 | Gross humorously sketches the split-screen scenario of 3 AM European earnings calls between a Miami hedge fund boss and an exhausted NYC analyst. Sundheim walks through his real-time triage process during erratic after-hours market reactions. | |
| Sponsor Segment: Stripe Treasury Solutions for Fast-Growing Businesses | 5 | 5 | 2 | 4 | After Collison's sponsor break for Stripe Treasury, Gross and Collison ask whether D1 is actually just playing sentiment and multiple expansion rather than Graham-and-Dodd fundamentals. Sundheim concedes that multiple expansion drives the bulk of returns but argues it is anchored in long-term cash flow durability. | |
| 10-Year Lockups: Clean Harbors, Siemens Energy, and AI Power Bottlenecks | 6 | 6 | 2 | 3 | Prompted for 10-year buy-and-hold picks, Sundheim pitches Clean Harbors due to incinerator NIMBY moats and Siemens Energy for AI power infrastructure bottlenecks. He highlights that conservative German turbine manufacturers are intentionally under-building capacity relative to Silicon Valley compute demand. | |
| The China Equity Trap: State Intervention and Capital Misallocation | 5 | 5 | 2 | 3 | Sundheim explains why D1 completely exited China three years ago, framing it as an uninvestable trap where arbitrary state intervention and lack of due process cap company upside and punish margin outperformance. | |
| Assessing AI Valuations: Bubble Checklists, Debt Financing, and Scaling Laws | 6 | 5 | 2 | 3 | Gross and Collison push Sundheim on bubble indicators in AI, comparing current valuations to the 1970s Nifty Fifty and 1999 tech bubble. Sundheim provides his bubble checklist—warning signs like debt-fueled CAPEX—but points out that core mega-cap AI leaders like Nvidia trade at reasonable multiples on real earnings. | |
| SpaceX's Unprecedented Moat: Rocket Reusability and Option Value | 5 | 5 | 1 | 2 | Sundheim breaks down D1's high conviction in SpaceX, praising Elon Musk's ruthless focus on driving launch cost per ton down by 99.9% to establish an insurmountable low-cost monopoly. Collison seconds the thesis, noting SpaceX's capital efficiency and direct-to-consumer innovations. | |
| D1's Private Portfolio Shift and Underwriting Stripe | 5 | 4 | 1 | 3 | Gross explores why D1's asset base shifted heavily into privates, prompting Sundheim to explain capacity constraints on short alpha. Sundheim shares how his background as a financial services analyst allowed D1 to quickly underwrite Stripe against weak legacy processors. | |
| Why Great Private Companies Stay Private and Public Market Distortions | 6 | 5 | 2 | 3 | Sundheim argues that high-performing private tech companies should avoid going public because public market volatility distorts employee compensation and pulls forward unjustified equity value. Collison summarizes the structural dilemma as robbing future employees to pay current employees. | |
| Future of Banking: Digital Challengers, Legacy Tech Debt, and AI Agents | 6 | 4 | 1 | 4 | Collison explores the structural resilience of US incumbent banks compared to European and LatAm digital neobanks like Revolut and Nubank. Sundheim evaluates whether AI coding agents will level the engineering playing field between agile fintech disruptors and legacy incumbents like JPMorgan. | |
| Advice for Aspiring Investors and Buffett's Unvarnished Early Letters | 6 | 4 | 1 | 2 | Sundheim advises young investors to read voraciously and study archived pitches on Value Investors Club. Collison demonstrates deep investor literacy by contrasting the sanitized later Berkshire Hathaway letters with Buffett's raw, unvarnished early partnership letters from the late 1950s. |
Statements from this episode (49)
Sundheim: D1 usually buys public stocks before finishing investment memos
“We're having to get to the memo stage, and usually we start buying it before, because in the public markets, you know, if you have a good idea, you could take a month and a half to, like, write a memo, but by that time, the price may have moved. So usually we …”
Sundheim: Private secondaries only offer easy liquidity for companies you shouldn't sell
“You can sell, like, the best companies you can sell easily, but those aren't the companies you want to sell. You know, it, it's, ah, we rarely transact in the secondary market because, you know, we don't want to sell the best companies, and it's hard, like peo…”
Sundheim: The biggest investing mistakes come from selling great compounders too early
“The biggest mistakes are selling the Costco's too early, because you know, the IRR is totally dependent upon what you assume the exit multiple is, like, and that is difficult to be precise about, you know, what the right exit multiple is for a business.”
Sundheim: Few tech companies before LLMs combined huge fixed costs with high margins
“Up until the LLMs are very few tech companies where it's like a huge fixed investment. And then the incremental, ah, margins on the sales are extremely high.”
Sundheim: Private market illiquidity is a huge benefit for holding great companies
“That's the nice thing about the private markets is that Once you invest, you can't sell, and usually for the best companies, that's a huge benefit ultimately.”
Sundheim: D1 Capital avoids hiring portfolio managers or public equity veterans
“One, we don't hire portfolio managers. I pretty much only hire people who've never done public equity before which has pros and cons.”
Sundheim: Hiring lateral portfolio managers from other funds almost never succeeds
“If I hire somebody laterally, who's a portfolio manager in another fund, that's rarely been successful, almost, almost never.”
Sundheim: Private equity hires take three years to contribute at D1
“Now, like, if I hire somebody from private equity, it takes about three years for them to really be, like, contributing to the one.”
Sundheim: D1 analysts must submit weekly mock portfolios allocating capital
“We, yeah, we, everyone has like a, what we call a mock portfolio. So every week they have to take the positions they cover and they have to say, if I was managing capital, here's how I would allocate capital.”
Sundheim: Monthly and quarterly returns are arbitrary outputs of past decisions
“If you have a portfolio of things that you've built over time, our monthly returns and quarterly returns are purely an output. Like there's nothing, it's, it is arbitrary in some respects.”
D1 Capital never received margin calls during the January 2021 GameStop squeeze
“We never came close to going into business, never had margin calls, never.”
Sundheim: Investing carries emotional asymmetry between mild gains and excruciating losses
“What I'd say about this job, is that there's like an asymmetry of emotion, right? Like, when you're making a lot of money, it's not like I'm, like, tap dancing around my house, like, euphoric, like, my lifestyle doesn't change. I feel like, yes, I'm happy that…”
D1 Capital covered all short positions at peak prices during GameStop rally
“We covered everything at the worst time, and I knew it was the worst time. But, if it kept going on for two weeks, yeah, all of a sudden there's a real problem, and I wasn't going to put the firm at risk, and I told my investors that this is the worst time.”
Sundheim: D1's 2020 short portfolio ultimately underperformed massively
“Now, if I had held that short portfolio, forget like from the top, if I just held from the end of 2020, I mean, they underperformed massively.”
Sundheim: Short selling opportunity is the best in his career
“I would say that the opportunity for short selling is better than it's ever been in my career.”
Sundheim: Managing risk after a position moves destroys capital
“Risk management cannot happen after the fact. Like, anything you do after the fact is not risk management. It's actually just destroying capital. Risk management has to happen before the fact. Meaning, like, you size these positions so that, like, When it goes…”
Sundheim: D1 paused short selling for a year after GameStop
“After GameStop, we took about a year off of short selling, and then I reengaged in short selling.”
Sundheim: D1's diversified short alpha matches its concentrated era
“Our short alpha since that time, and since we implemented the more diverse portfolio you referenced, our short alpha has been as good or better”
Sundheim: Cyclical over-earning shorts are the least attractive archetype
“And then I'd say the last, ah, and least attractive shorts are the ones where it's like, cyclically, they're just over earning a lot, and you believe that the real earnings, if you were to look like through a cycle, are much lower than people think.”
Sundheim: Companies facing secular decline almost never get acquired
“I find that, like generally, companies that have secularists almost never get bought. Like, I rarely has, do I ever see a CEO say, I want to go buy something that grows slower than I do, right? Like, this doesn't happen, right? Nobody wants, like, Take the tim…”
Sundheim: D1 Capital does not use derivatives due to timeframe risk
“I don't use, I really don't use derivatives at all. The problem with derivatives is like, look, At the end of the day, when you break down, what is a derivative? It's just leverage and implied volatility. Like, if I want leverage, I can go, you know, get lever…”
Sundheim: US markets price turnaround stories far faster than Europe
“Like, the U.S. Is pretty quick at, like, seeing change happening, and then pricing in that change. In Europe, I find you know, once a company, like a company like Rolls had underperformed for so long, I guess that European mutual funds, they just kind of got i…”
Sundheim: D1 analysts must be awake during coverage earnings calls
“If the company reports earnings, I expect the analyst to be awake. And I'm awake too.”
Sundheim: D1 Capital will definitely not expand into macro trading
“Definitely not macro. First of all, like, it's tempting to think that because you're good at one thing, you're going to be good at all these different things, and, ah, I think that in and of itself was like a mistake.”
Sundheim: Quality equities compound through mistakes, while macro bets are binary
“If you buy great businesses, you overpay for them a little bit, you get their earnings wrong a little bit in the short term. Over time, value, you know, compounds, and time is your friend. Macro, that's not the case. It's more of, like, a binary bet.”
Sundheim: Investors always make the most money from multiple expansion
“You're always gonna make the most money from multiple expansion. Just like it's hard to have that differentiated view on a company's growth rate.”
Sundheim: Clean Harbors owns majority of US hazardous waste incinerators
“There's a couple called Clean Harbors, which I like a lot, which is, they do hazardous waste, and they own the majority of the incinerators in the United States. You can't really build more incinerators because of NIMBY.”
Sundheim: Clean Harbors can grow earnings in the teens for 10 years
“It's just very, very good business that's, and the starting multiple is pretty reasonable, and I think, you know, I can grow earnings well into the teens for 10 years.”
Sundheim: Gas turbines will face shortages for a very long time
“I think that gas turbines are going to be in shortage for a very long time.”
Sundheim: US electricity demand will grow 4% annually over 20 years
“Electricity demand in the United States grew at zero percent for the last 20 years. And so, if you think about the next 20 years, I think electricity demand will grow at four percent.”
Sundheim: Electricity is the AI bottleneck, making power enablers good investments
“Ultimately, the bottleneck is going to be electricity, and so companies that enable electricity production, assuming they have some moats, are going to be good investments.”
Sundheim: Siemens Energy and GE Vernova have near-identical revenue and businesses
“Siemens Energy and GE Vinova are basically the same company. Like, there's no two companies I've ever looked at that are more similar. They have almost the same revenue, dollar revenue, I think it's like, 45, 50.”
Sundheim: GE Vernova trades at 2x Siemens Energy's enterprise value
“G Renova trades at two x the enterprise value of Siemens energy, just to give you a sense of like, and ultimately, there's no reason why the margin should be higher at G Renova. The revenue base is the same.”
Sundheim: D1 Capital stopped investing in China around 2022
“Yeah, we stopped investing in China about three years ago.”
Sundheim: Chinese tech firms avoided beating earnings to dodge scrutiny
“For a while we were seeing Chinese internet companies, like, they didn't want to beat earnings. Because if you beat earnings, your stock goes up too much. You know, you might be flagging that, like, you're over-earning”
Sundheim: AI market correction will hit when training returns asymptote
“At some point, they're going to say like, well, we're asymptoting out, like the returns on this new investment are actually not working. That's when I think you'll see a pretty big correction.”
Sundheim: D1 Capital should have owned more AI stocks
“I think to our detriment.
We should have owned more AI stocks.”
Sundheim: Nvidia is not expensive and public AI stocks aren't in a bubble
“I would tell you, like, NVIDIA is, we can have a debate about what the earnings are going to be in a few years but it's not expensive.
Like, NVIDIA trades at twenty-something times multiple.
that's, you know, I think within reason, and I don't think there's…”
Sundheim: 70% of major breakthrough technologies trigger stock bubbles
“I think if you look back in history, 70% of the time that you have this kind of, like, major breakthrough technology, there is a stock market bubble.”
Sundheim: SpaceX will capture more global telecom market than expected
“And I think that will continue in a way that probably surprises people, in that like, I think SpaceX will probably capture more of the global,
Telecommunications market than people expect.”
SpaceX can triple in value without relying on speculative new use cases
“Like, I look at it and say, like, I think the business can triple
Without having to make any big bets about people traveling 30 minutes across the world or, you know, data centers in space.”
Sundheim: Elon Musk is an even better businessperson than inventor
“I think he's a better business person than he is inventor.
He's amazing at both, but like, people don't understand, like, he just naturally understands, like, just get the cost down, and that's very hard to compete against.”
Sundheim: A $30B fund cannot practically short $5B companies
“If I'm thirty billion dollars, it's really, you can't really short five billion dollar companies”
Sundheim: Premier private companies like Stripe should not go public
“I mean, if I ran a private company like Stripe, I wouldn't go public.”
Public stock markets have become less efficient despite universal access to information
“It should be correctly priced because everyone has access to the same information. It's actually gotten less efficient over time, for sure.”
Sundheim: Neobanks like Nubank and Revolut will increasingly take market share
“Iterate on product faster, have better engineers, and I think that those banks are going to increasingly take market share.”
Collison: Buffett's early partnership letters show raw ambition sanded off later
“What's interesting is I find it stylistically very different. This is the late fifties, early sixties, and it's before he got so polished, you know, it's before he got so folksy and approachable and careful in what he said, and a little more of the raw ambitio…”