Comment by yossi_peti
1 month ago
I guess the reasoning assumes that you have multiple eggs in your basket. A 95% chance of failure is bad if you're pinning the whole business on it, but if you have a variety of 5% chance deals, then it can make sense to pursue them, which is basically what venture capitalists do.
> A 95% chance of failure is bad if you're pinning the whole business on it, but if you have a variety of 5% chance deals, then it can make sense to pursue them
This is only true if the probability distributions for the values of the individual deals are rather uncorrelated (or even better: stochastically mostly independent).
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It’s easy to predict that, but when has “the whole thing” ever crashed?
Sure, markets can crash, but this idea of “go to zero” never happens.
That’s the whole calculus of these investments. Many of them are expected to fail.
The fact that it’s painful to the average person means nothing to the people who run the system.
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