Huang Over

Lessons from Jensen Huang's very bad week can make us better investors.

We have all been there. The wretched morning after the party that got out of hand, the words we cannot take back, or the decision we wish we could undo. Regret makes us reflective. We swear off the foolishness. Then the feeling fades, we recover our confidence, and sometimes we do it again.

Watching Jensen Huang’s departure from Nvidia is shocking but should not be. The scale of its impact is extraordinary, but not much else about it is. Observing it unfold, I realize I have nothing useful to offer in terms of judgement about the personal and institutional failures. Neither do I offer speculation about what any of it means for Nvidia or AI. Both of those stories will play out with time.

But I can use his story to improve my own professional judgment—decision making as an asset allocator and investor. Here are three lessons reinforced by the Jensen Huang story.

1. Investment risk is described by math, but human behavior is the dominant source of investment risk.

Investment risk is often illustrated with math concepts like probability. Put 100 marbles in a velvet sack: 80 black, 20 white. Draw a white one and win $100. The odds are known. Draw without replacing the marble, and we can calculate exactly how the odds change each round of the game. My mood, greed, or ambition cannot alter the game.

Investing involves people who not only impact the game but are the game. An executive takes a reckless risk with little personal downside. Maybe a subordinate does not challenge it because he wants to be favored for a promotion. A politician pursues revenge against a rival by cancelling a contract or threatening regulatory interference. Someone offers a conspiratorial narrative about a person, company, or technology and the people on social media (not the software) quickly turn misinformation into a durable bias that will resist any truth or logic.

Investment professionals use historical standard deviation of returns to describe volatility. You can calculate the standard deviation of Nvidia’s stock returns, which has useful applications in analysis. Those historical returns reflect the consequences of past human behavior. But they cannot tell us what someone will do tomorrow, when news like Jensen Huang’s will break, or how investors will react. The specific event and its consequences are not captured in the historical data before they occur and so we should be wary of our confidence in the mathematical models.

2. These human risks are well understood but routinely minimized in making investments.

Think of the common warning on investments, some version of “past results are not predictive of future results.” A hedge fund manager might have gained 15% in 2025, the warning reminds you there is no guarantee such a good result will repeat this year. It makes sense because we know how many financial and economic factors fall outside of the control of that hedge fund manager.

We learn that in business school, and investing is expressed like a STEM discipline. But it is so very human. We gain more relevant preparation from Sunday School and literature class. Icarus disregards his limits. King David gives in to temptation and abuses his power. Samson’s strength cannot protect him from his vulnerability.

Now back to the hedge fund manager. Regardless of his investment thesis and intellectual insights, would you hand over $1 million to him if you knew he is being sued by three former clients? What if he is routinely disloyal or narcissistic, mistreats employees, or has none of his own personal fortune at risk in the investment?  You would hesitate, but it is easy to let potential returns crowd out those questions.

If you make big, concentrated bets, you can bet that your success rides on the reliability of a few humans. That’s the case for thorough due diligence. My own study and practice of due diligence led me often to stories that sounded more like parables, Greek tragedies and fables than miscalculations on a spreadsheet. It’s why I so often quote Charlie Munger and Warren Buffett. Their investment thinking repeatedly returns to character, incentives, and human behavior.

We are unlikely to have personal exposure to someone like Jensen Huang to make a judgement about his reliability. But corporate culture, public behavior, incentives, associations, past decision making and the like provide plenty of hints. There are public financial companies I won’t do business with because their management routinely puts its personal interests ahead of clients’ interests. I don’t need to meet the CEO or know the state of his marriage to make a decision not to invest.

3. Even when red flags of human misbehavior are obvious, we often look right past them.

After a reckoning, we often hear that “everyone knew.” Sometimes hindsight makes the past look clearer than it was. But recognizing a warning and accepting the cost of responding to it are different things.

When someone makes us money, employs us, or validates our beliefs, acknowledging their weaknesses can become expensive. We justify, compromise, rationalize. We call arrogance confidence and recklessness conviction. Something that has worked becomes something we cannot afford to have fail.

Related to Nvidia, it is likely that dozens of insiders at the company and in the government knew about the affairs and leaks of chips to China. Given the money and stakes, no one should be surprised that it took so long before the whistle was blown. With humility, can you say if you were Jensen’s direct report, you would risk the career and stock grants to confront him? Some version of willful blindness is happening now all around us, in politics, businesses, investment portfolios, and our own decisions.

What are we explaining away today that is likely to become a reckoning tomorrow? The midterms were a reckoning as they so often are. By now we should recognize the pattern. The party in power feels empowered and for a while voters tend to accept and excuse bad political behavior. Then they overstep and their promises fail to materialize and voters turn against them. That pattern won’t change, but we can.

The Jensen Huang story tells me to look around, try to bring to the surface what should be questioned and scrutinized. I cannot control the judgment of every person my investments depend upon. I can examine my own decisions, biases, and weaknesses, and look for the blind spots I am willfully ignoring.

I can recognize the source of risk, revisit the wisdom of scripture and literature, and put up guardrails to avoid decisions I might later regret. Jensen Huang’s story is just the latest character in the latest cautionary tale. He joins Samson, King David, King Midas, or Narcissus as reminders that humans disappoint, sometime with big consequences. When it comes to investing, let’s be prepared for it.