Comment by suzzer99
20 hours ago
My general observation is that people tend to underestimate the likelihood of black swan events (covid, financial crisis) even as it's pretty obvious they're happening. And then when they do accept it, they react too far the other way and assume it's never going to end.
I've had success playing the markets in these specific cases. I did fritter away a lot of my gains from the financial crisis thinking I was a genius market timer. But I learned my lesson and didn't waver once I jumped back in after covid.
In both cases I got out before a bulk of the crash and timed the bottom almost to the day. Lucky I know, but I had reasons for both. For the financial crisis it was when Bill Fleckenstein closed his bear fund and put it all in MSFT. For covid it was when it looked like the lockdown was working and NYC hospitals weren't going to completely fall over like Northern Italy or Wuhan.
For any non black-swan scenarios, I assume I'll never get one up on the masters of the universe and just leave everything in blended age-appropriate funds.
I'm very concerned about an AI crash and the future of white collar work in general. But it feels more like a slow death to me than a black swan. So I'm just hedging with bonds and cash and stocks that hopefully don't crash as hard in a recession.
They underestimate the likelihood of black swan because it is very hard for adults to concretely imagine things that have not happened before and then even temporarily fully believe ~"dreams will come true."
One of my go-tos on this is the Fukushima nuclear accident. IIUC there were plenty of folks in Japan who knew of the high risk. Perhaps many interested in nuclear energy outside of Japan, too.
But the average adult if asked about the prospect of a major nuclear incident occurring say, "tomorrow," would narrow their eyes in skepticism. There's almost an instinctual level seeding of doubt.
This can be a good thing. LK-99 was an excellent test of the dissonance from dramatic changes in reality and costs of inaccuracy.
The greatest VCs I have known are exceptional at suspending disbelief to test their ability to basically shape world building.
Yeah, I can't say for sure it's going to happen, but I can clearly see a path where AI ends the middle class in developed countries, which has really only existed in its current form since WWII. Most people can't imagine that.
I would also not want to take even a fair bet against black swan because the day that "S&P500 falls to lowest level since 2016 as Labubus collapse" is the headline is the exact day I least want to lose a big pile of money gambling. If it's the shareholder's money though.... I'm probably getting laid off in that scenario anyways...
I make similar bets. The SAAS "apocalypse" looks like a buying opportunity to me.