I build startups and treat ideas as small bets | RWRI Alumni
Jul 28, 2022 • 8 tweets • 4 min read
Highlights of the last day of #RWRI17 (parting wisdom)
▪️No rumor can be considered true until officially denied.
▪️The world is more fat tailed than you think.
▪️In the risk taking world, only the hyperparanoid will survive.
▪️If it makes sense to buy an option, don't buy it.
▪️Correlation is not causation
correlation. What is the correlation when something huge happens?
▪️Under fat tails, maximum estimate of the population average is more appropriate than sample mean.
▪️Treat the companies you are investing in as your own business.
▪️If something involves ruin, probabilistic estimates are worthless. 100 people playing Russian roulette exhibit different properties from one man playing 100 times. After 7 trials, the man might face the ultimate death risk.
@nntaleb2/7 ▪️Only one of the potential paths will be brought into actuality. If unsure what to do next, you should ask yourself: 'Do you want this again and innumerable times again? ' Would you accept this 'eternal return' for your portfolio?
▪️Losses from a series of mediocristan risk events are highly predictable, given that they are IID (car accidents). The extremistan risks are catastrophes that cascade into even more risky events. Their aggregate losses are difficult to evaluate.
2/7 ▪️Catastrophic events violate LLN by nonlinearity and dependence, therefore losses cannot be calculated through CLT.
▪️1+a & 1-a. Perturbate your current position by +-a. If you are much better off in the +a position than the loss of -a, you are anti-fragile.
