I’d like to push back a bit against the downsides of being overconfident, which I think you undersell. Investing in a bad stock could lose you all your investment money (shorting even more so). Pursuing an ultimately bad startup idea might not hurt too much, unless you’ve gotten far enough that you have offices and VC dollars and people who need their paychecks. For something like COVID, mere overstocking of supplies probably won’t hurt, but you’ll lose a lot of social clout if you decide to get to a bunker for something that may end up harmless.
Risk is risk, and the more invested you are in something, the more you have to lose—stocks, startups, respiratory diseases. I fear being overconfident would lead to a lot of failure and pain. Almost everything in idea space is wrong, and humanity has clustered around the stuff that’s mostly right already.
In light of the FTX thing, maybe a particularly important heuristic is to notice cases where the worst-case is not lower-bounded at zero. Examples:
Shorting stock vs buying put options
Running an ambitious startup that fails is usually just zero, but what if it’s committed funding & tied its reputation to lots of important things that will now struggle?
More twistily—what if you’re committing to a course of action s.t. you’ll likely feel immense pressure to take negative-EV actions later on, like committing fraud in order to save your company or pushing for more AI progress so you can stay in the lead?
Not that you should definitely not do things that potentially have large-negative downsides, but you can be a lot more willing to experiment when the downside is capped at zero.
I’d like to push back a bit against the downsides of being overconfident, which I think you undersell. Investing in a bad stock could lose you all your investment money (shorting even more so). Pursuing an ultimately bad startup idea might not hurt too much, unless you’ve gotten far enough that you have offices and VC dollars and people who need their paychecks. For something like COVID, mere overstocking of supplies probably won’t hurt, but you’ll lose a lot of social clout if you decide to get to a bunker for something that may end up harmless.
Risk is risk, and the more invested you are in something, the more you have to lose—stocks, startups, respiratory diseases. I fear being overconfident would lead to a lot of failure and pain. Almost everything in idea space is wrong, and humanity has clustered around the stuff that’s mostly right already.
In light of the FTX thing, maybe a particularly important heuristic is to notice cases where the worst-case is not lower-bounded at zero. Examples:
Shorting stock vs buying put options
Running an ambitious startup that fails is usually just zero, but what if it’s committed funding & tied its reputation to lots of important things that will now struggle?
More twistily—what if you’re committing to a course of action s.t. you’ll likely feel immense pressure to take negative-EV actions later on, like committing fraud in order to save your company or pushing for more AI progress so you can stay in the lead?
Not that you should definitely not do things that potentially have large-negative downsides, but you can be a lot more willing to experiment when the downside is capped at zero.