Why Your “Insider Edge” Is Way Smaller Than You Think

If you work at a publicly traded company you helped build, it’s natural to believe you have an edge.

You know the product.

You know the roadmap.

You know the people.

You know what’s coming next.

In this article, I’m unfortunately here to burst your proverbial bubble. That “edge” you think you have rarely worth nearly as much as you think it is.

You don’t have to believe me - and I don’t know your exact situation. But my background lends itself to a unique vantage point:

• I worked on Wall Street as a tech-sector stock market analyst for 5 years picking stocks where I advised Hedge Fund analysts 2+ hours every day

• I worked in tech (lucky enough to experience 2 IPOs) for nearly a decade, and

• For the last 5+ years I’ve advise 100s of tech folks with 7, 8-, and 9-figure net worths about their tech wealth

Deciding what to do with your company stock, which many times is >50% of your wealth, is psychologically challenging. I fully get that (and I was in your shoes once with the same problem).

But if you’re leaning toward holding a significant amount of your wealth in your company stock because you’re confident your insider knowledge gives you an advantage, I encourage you to read and consider the below.

UNCOMFORTABLE TRUTH #1: The Public Is WAY Smarter Than You May Think

Public markets investors are smart. Like really smart.

In public markets, anyone can play (you don’t need special VC access to the hottest deals). And there is way more time, research, and technology that goes into analyzing publicly traded companies than is realized IMO. For example, this is what Hedge Funds/Mutual Funds/Endowments investors frequently review:

• They of course know your historical financials (required to report them quarterly)

• But they also have near-real-time insights into your revenue, and possibly margins (yes, you read that right). There are multiple ways they do this:

  • Analyzing anonymized daily credit card purchase histories of millions of consumers

  • Using video cameras and satellite images to track all sorts of things in real time (e.g. parking lot density, store foot traffic, oil reserve levels, etc.)

  • Analyzing anonymized cell phone traffic for consumer habits, location densities, etc.

  • Conducting sophisticated, daily web scraping research (how many reservations a restaurant has, inventory stocks at a retailer, etc.)

  • Sentiment analyses and purchase quantifications from social media posts

  • It’s a lot. They know a LOT

• AND they also know a ton about you company’s future plans. Likely about as much as you do. Because your C-level executives discussing that in company town hall meetings….they meet/talk with public investors frequently and tell them pretty much the same things

UNCOMFORTABLE TRUTH #2: What Actually Drives Stock Returns?

Even if the above doesn’t persuade you, I also think its helpful to provide details on what PhD research says actually drives stock price movements:

• ~50% of returns come from the overall market (as in the S&P 500)

• ~30% from industry / sector effects (e.g. Tech industry)

• Which leaves ~20% of returns from company-specific factors

Yep, 20%. Said another way, only one-fifth of a stock’s long-term performance is statistically “about the company.” The other 80% is driven by macro forces, capital flows, interest rates, sentiment, and sector repricing—none of which is meaningfully influenced or controlled by your company.

TLDR: Insider Knowledge ≠ Meaningful Edge

Yes—you may know things outsiders don’t. But outsiders also may know things you don’t (they get to also have candid conversations with the CEOs of your competitors, suppliers, and business customers).

In public markets, the value of a company is materially tied to expectations, not internal narratives. Any true informational edges are typically thin, short-lived, and quickly arbitraged away.

Fun fact: even elite hedge fund traders are right only ~52% of the time. And they make 100s of different investments (in part because they’ve quantified their success rate and making many bets help them realize that minor edge).

So What Should I Do?

Take a step back and remember that the decision to sell or hold your stock does not equate to your faith in the business you built. Your risk management strategy for concentrated holdings in your company should be driven by a number of different factors, namely your financial goals (eg buy a house, retire early, costs for taking care of parents or a child), personal comfort with risk and loss, and your overall financial profile (if you have $50 million, you've got things covered and can lean into risk a lot more than if you have $500k).

What should NOT be driving your decision is the belief that your knowledge as an employee allows you to predict your company’s future stock performance (or at least not better than all the experts out there trying to do the same).

When a company is Pre-IPO, things like growth and future plans seemingly impact VC pricing as you move from A→B→C. But when you’re publicly traded, it’s a different dynamic. The stock is repriced every day by a market that is far larger, far more diversified, and far more sensitive to forces outside the company than most people realize. Growth still matters—but so do interest rates, sector rotations, profitability expectations, geo-politics, and broad market sentiment. And those forces dominate far more of the outcome than any information edge you as an insider may have (if you even have one).

So if part of your decision to hold a large, concentrated position is rooted in the idea “I know more than the market,” it’s worth pausing. Not to abandon conviction—but to ensure you’re making the most rational decisions to meet your financial goals.