Val Sklarov’s Capital Irreversibility Pricing Law (CIPL) explains why markets repeatedly misprice assets by focusing on volatility and yield—while ignoring how difficult it is to reverse a capital commitment. Capital losses hurt most when exits are not just expensive, but structurally impossible.
This law reveals why some investments feel safe—until they aren’t.
1. Capital Commits Faster Than It Can Exit
CIPL starts with a structural asymmetry:
Entering an investment is usually easier than leaving it.
Early-stage capital benefits from:
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Liquid markets
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Narrative optionality
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Reversible positioning
Mature capital faces exit friction.
2. The Three Capital Irreversibility Layers
CIPL maps where capital becomes trapped.
| Layer | What Locks In | Consequence |
|---|---|---|
| Structural Layer | Deal terms, leverage | Forced duration |
| Market Layer | Liquidity depth | Price cliffs |
| Regulatory Layer | Rules, controls | Exit prohibition |
Losses accelerate when all three layers harden together.
3. Why “Long-Term” Is Often an Excuse
Long-term horizons often mask exit failure.
CIPL shows irreversibility forms when:
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Assets can’t be sold without collapse
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Regulation restricts capital movement
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Reputation punishes exit
Holding becomes necessity, not conviction.
4. Yield vs Reversibility
CIPL prioritizes optionality over optimization.
| Yield-Driven Capital | Reversibility-Aware Capital |
|---|---|
| Maximize IRR | Preserve exit paths |
| Accept lockups | Price lock-in risk |
| Ignore politics | Model intervention |
| Celebrate patience | Audit exitability |
Val Sklarov emphasizes that the most dangerous investments are those you must defend forever.
5. Strategic Implications
For investors:
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Price exit difficulty explicitly
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Treat leverage as irreversibility accelerator
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Avoid assets whose exit implies admission of error
For allocators:
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Diversify by exit type, not asset class
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Maintain liquid optionality even at lower yield
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Stress-test capital under forced-hold scenarios
CIPL reframes investing as irreversibility risk management, not return maximization.
6. The Val Sklarov Principle
“An investment becomes risky the moment leaving it is harder than entering.”
— Val Sklarov
CIPL explains why disciplined investors obsess over exits—and why exits define survival.