Save like a pessimist, invest like an optimist
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At some point the exponential curve has to go S-shaped. Maybe we’re still in the happy exponential looking part of the curve. There are also signs we might be transitioning. Population growth has slowed, productivity growth has slowed, and the marginal return on capital seems to be somewhere around zero given modern interest rates.
The German car industry wouldn't have been thinkable hadn't the Germans invested a lot of research into building machines in a mass produced way, motor research, etc. Sure, the factories themselves were destroyed, but the engineers together with their knowledge remained.
In fact, there are theories that disruptive events are even helpful for economic progress in the long run because they filter out the lazy elite of rich people while giving opportunities for new ideas to be tried out, and hard working people to rise to wealth and influence.
Also, these events "filter out" a lot more than just "lazy elite rich people". Plenty of productive rich people and regular every day people are filtered out as well.
As did all the others that can before the current one.
I also question the value of genius at driving GDP growth indefinitely. Eventually you run into natural laws that are insurmountable; you can’t genius your way out of entropy.
That said, the GDP wall could well be millennia away and we still have tons of room for growth. Maybe we finally bring cheap fusion online, solve asteroid mining, and terraform anything remotely habitable around us. Or maybe we don’t, investment as a vehicle for income fails, and no one gets to retire in 50 years.
I gotta say though, the chances seem extremely slim and it’s more likely that climate change would trigger a reduction in the production capacity of humanity triggering political changes that may make it impossible to solve these problems.
For example Peter Higgs says that what he accomplished would no longer be possible today with how modern academia works: https://www.theguardian.com/science/2013/dec/06/peter-higgs-...
Overall I’m pessimistic that another Einstein is possible in the timeframe that we need them and that they would have the motivations to solve the problems that we need solved.
My cynical view is that realistically another Einstein would probably just get sucked into figuring out how to use big data analytics to get users to click on ads all so they could buy a $2M three bedroom house in the Bay Area.
The fact that the rate of growth will someday slow means assumptions you make about your 401k may or may not hold if we happen to be at the wrong point on the curve.
Also, higher production doesn’t mean higher natural resource consumption —- dematerialization is real. My phone satisfies my needs far more than a landline could but requires far less natural resources.
Your second point is an interesting one. I do think we’re gradually moving to a world of artificial scarcity (brand names, luxury goods, bitcoin etc.), plus some things will always be scarce by nature (access to important people, people’s time). So perhaps we’ll just discover that the connection between resource scarcity and human desires is accidental.
I do also agree that certain things that are scarce by design or by their nature and will continue to be so.
Anyone who thinks we will run out of things to create just lacks imagination. There's so much stuff we'd really, really like to have but haven't been able to economically create yet. Medicine, body modifications, automation of all that's boring, cheaper manufacturing of everything, entertainment, recreation, transport, space habitats and almost anything else you can imagine.
In a world of such dramatic surplus, it's either that or violent revolution, so I'm fairly sure it would sort itself out.
https://dothemath.ucsd.edu/2012/04/economist-meets-physicist...
Additionally, California has exported much of it's energy use to other states and countries.
Honestly your reply is frustrating because you sound like you don't understand my point. Please re read my comment from before.
Your original claim about California doesn't hold because it's bias.
But it won't continue to grow now, which is what I showed with California. You have fundamentally misunderstood my example. The physicist claimed exponential per capita energy consumption growth, but California shows that isn't happening.
"The material footprint of nations", Thomas O. Wiedmann, Heinz Schandl, Manfred Lenzen, Daniel Moran, Sangwon Suh, James West, and Keiichiro Kanemoto
PNAS first published September 3, 2013; https://doi.org/10.1073/pnas.1220362110
https://www.pnas.org/content/early/2013/08/28/1220362110
https://web.archive.org/web/20130906063246/https://newsroom....
Economic growth may not be able to continue indefinitely, it’s inconclusive, your computers can create more economic value with declining watts even if you can’t. However accounting value, which is what a stock market is, can definitely grow indefinitely.
The stock market isn't backward looking, or even short term future looking. Note that someone only watching the S&P 500 would know that the coronavirus broke out in early March but probably think the situation had been completely resolved by August. We can't be sure what the stock market thinks it is seeing (or if it is right for that matter).
And if energy bets didn't turn out well, notice that that correlates to the US losing its position as the world's largest economy. China invested a bunch in energy and now have a noticeably bigger economy [0].
> Economic growth may not be able to continue indefinitely, it’s inconclusive, your computers can create more economic value with declining watts even if you can’t.
This growth isn't going to involve more people because they need food and isn't going to involve more stuff because that needs energy. It'll be a very abstract form of growth.
[0] https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)
(Though the two are very often confused.)
Stock markets occasionally move in directions other than up.
> Economic growth measures the number of ways resources (material and non-material) are used hence resources are like the universe; "finite but unbounded." Tom Murphy is a typical Newtonian in his mindset and this imperial reasoning is so pre-Planck.
> Even in a so-called steady state any substitution from one material to another would seen as a kind of economic growth simply because markets the place more value on the newer item.
> Second. He assume that exponential economic growth is tied to some physical exponential. It is not. What is the basis for the recent exponential growth of physical consumption. It is growing population. It has been shown that energy growth of consumption doesn't increase much beyond 150k dollars. So once population stabilizes the physical growth model switches from exponential to linear. Tom Murphy never makes a linear growth model and thus his short-term peakerism.
http://mikenormaneconomics.blogspot.com/2012/04/tom-murphy-e...
Impractically, that buys you surprisingly little.
"Galactic-Scale Energy"
In 2450 years, we use as much as all hundred-billion stars in the Milky Way galaxy.
In principle yes, of course.
In practice, you are imagining a world in which we never expand our civilization into space and across the galaxy, because otherwise you would be looking at the S curve and thinking "wow, this thing has only just gotten started" and marveling at what lies ahead.
There is less low hanging fruit as things progress. I'd guess we're very close to the peak of attainable technology.
Once sustainability comes into the picture then, IMO, we're beyond the limit.
Not many people, and pretty much no research scientist, would agree with that statement. I can personally think of several technologies I'm 100% certain will exist in < 40 years that will drastically alter everything about day to day life.
Not if they decide to use nuclear power. Humanity has at least one more dramatic jump in power-use/person that has been ready since the 1960's.
An as an aside, GDP is only a proxy for how prolific an economy/country is. The country's output can continue to grow without generating more dollars.
Why would you even need forever growth? Is it good enough that old companies die and new companies replace the old? In that process, there's always growth to find and invest in?
https://www.learnastronomyhq.com/articles/how-long-would-it-...
Plenty of room for a very large economy. The next galaxy would take some doing though since it is 2.5 million ly away.
So it still needs to slow down growth, although growth can still occur indefinitely. Well, billions of years until stars naturally start burning out, in which case you get a slowing of growth and degrowth until you're huddled around red dwarfs for a trillion or so years and then harvesting energy from black holes until like a quadrillion years.
Having an emergency fund can benefit everyone but beyond that your portfolio should ideally be driven by your goals and their timeline. If you have no goals and you're just trying to make as much money as possible in the stock market like a lot of new retail investors, this definitely should be given some thought.
I think most could be better served by learning and applying goal-based investing and modern portfolio theory to achieve what this article is clumsily trying to suggest.
Don’t worry too much: My kids will 100% have to work if they don’t want a sucky life.
Edit: Ha! I did not catch the part at the end where this is the same author as that book. Ok then!
Whenever this happens, I take care to pay special attention, because often the point is banal, or flawed, or too inconsequential to stand on its own. (I happen to know this because I’ve used this technique a few times on this very blog, and I know from reader feedback how effective it is)."
It is a classic trend. Anyone writing a book or trying to reach a wide audience has to cater for the fact that the audience has none of the skills required to assess complex claims. Most of the readers aren't going to be good at maths, are not going to have a grasp on the nuances of human behaviour and incentives, struggle with science, don't read history, etc, etc.
What most people are good at is copying successful people. So it is extremely common for people with large audiences to converge to a "Here is an example of a famous person, here is what they did. Here is another famous person, they did the same thing" style.
IBK currently allows retail investors to trade on margin with an annual interest rate of only 1% (yes, really). You can borrow up to 2x your principle at this rate.
If you were extremely optimistic, you would borrow 2x your principal and expect to 3x your annual return.
If you were optimistic but wanted to avoid risk of ruin, you would borrow between 0-1x of your principal.
Curious if anyone here has considered this or has a strong opinion on it.
Side-note: I'm assuming my "principle" in the above scenarios is the remaining cash I have on hand after my rainy day fund (i.e. the saving like a pessimist part).
In short, there’s no set of circumstances where my decision tree comes down on the side of taking the loan.
I see. Would your thinking change if your emergency fund was sufficiently large but much smaller than your investable cash?
For example, let's say your rainy day fund was $10, and you have $100. You have $90 to invest. In this case, the short-term loan you're taking out could range from $0-270 (the majority of cases would not be covered by your rainy day fund).
For example in crypto, market makers are commonly making 100% return. You haven't heard of these firms and they aren't interested in your money.
Market makers usually do quite well for themselves, but are capacity constrained: they can earn stellar returns on tens of millions of capital, but maybe not hundreds of millions or billions. You probably haven't heard of most of these firms and they would prefer to keep it that way.
of course if you want a public example, look at RenTec. They are unique in generating eye popping returns with such a large amount of capital. This is extremely uncommon. However generating comparable returns on 500-1000x less capital is significantly more common. These returns often don't compound tho, as they are severely capacity constrained.
But I’m a retail investor, and will almost certainly remain one— Not only do I not have the training to come up with these strategies, I don’t have the knowledge to judge the veracity of anyone claiming to sell them to me either. I’m content with my suboptimal portfolio that I don’t have to think about more than once a year, and have more important things to spend my time on.
Equities are different because their connection (however tenuous) to actual earnings gives them a very steady long-term uptrend. The hard part is just staying in during a crash so you don’t miss the recovery. Half of S&P 500 returns came on its ten best days.
In my opinion, and practice, emergency funds should not be used for investments ever, this includes covering the losses from investing. Yes it can feel like you are not maximizing your returns on that amount of money but its job isn't to generate returns, it is your help smooth out the bumps in the road of life for you. In my experience life can punch hard and it never throws just one punch, it is usually a 1,2,3 combo. That emergency fund is merely there to help raise the chances of you standing on your feet after the vicious flurry.
If you want leverage and you are in the US or have a US based brokerage account use options. By using options your all in is basically the cost of the option and this ensures you will not ever lose more than you paid. PLEASE note the previous sentence is predicated on the golden rule of NEVER WRITE an uncovered/naked option, seriously do not do it!!!! I also use the 5% rule, which no one trade is more than 5% of my portfolio so no one trade will destroy me.
Perhaps investing on margin is the same. I have personally taken the leap and got rid of my emergency fund. But I haven’t looked at investing long-term on margin yet. I did see a test from HEDGEFUNDFIE on bogleheads forums about this. But I haven’t looked into it. I definitely think taking out a margin loan while simultaneously having an EF in cash makes no sense though.
I don’t follow the logic here. It doesn’t need to reduce your funds anywhere near the emergency amount.
If it reduces your investments to 3x your emergency you were just forced to sell 1/3 of your portfolio at what is potentially the lowest point.
1. To have enough money to survive an emergency no matter what.
2. To maximize long-term net worth on average.
I was only talking about 1. You are talking about 2. But, to address your point: yes, stocks can indeed go down, but on average they go up. Sometimes your emergency will coincide with a good stock market. You're literally choosing the worst possible situation and then saying "see, this strategy doesn't work!". But I'm actually being very careful with my words here. I am saying: mathematically, backtesting with real data and with monte carlo simulations, you will maximize your long-term net worth on average if you forgo the EF after a certain net worth level.
Consider also the original comment I replied to talked about investing on margin while simultaneously having an EF. Which, if you're against me forgoing an EF, you must really be against investing on margin while having an EF: That's kind of the same to what I'm currently doing, only paying interest for it!
You argue keeping stocks is ideal for 2 (sure) and it doesn’t hurt 1 (assuming your net worth is significantly higher than what you’d keep as EF). Agreed.
An EF is for 3. Maximize long-term net worth in x th percentile of outcomes (where x < 10)
EDIT: “ you must really be against investing on margin while having an EF”. Yep.
The dollar is only useful as long as the US government continues to perform as an organization. However, as the US approaches dissolution, I would expect the value of USD to approach zero as the government increases the supply of money and prospective owners of the currency lose trust in its ability to retain value in the future.
Are you seriously suggesting, on a hacker forum, to be prepared to use the proceeds of your emergency fund to violently steal life-critical resources from other people in a crisis?
I really hope I've misunderstood, and you're using the phrase "go on offense" as a euphemism for deer hunting.
It’s conceivable to imagine a scenario where resources are so limited that acquiring them becomes a do or die situation, which is what I imagine the previous poster meant by “zombie apocalypse” scenario (or more realistically, war). Or I erroneously assumed “zombie apocalypse” to mean worst case scenario.
I also forgot to include a less drastic measures of also owning assets in a different country and the rights to live there in case you need to immigrate.
I mean, you chose a 10% figure. Why 10%? Why not 20% or 5%? I think it's helpful to really think through the math sometimes.
For me the past year shows that the economy has been more resilient than most people expected, that the Fed is willing to drop rates to zero in order to keep it that way, and that the stock market actually goes up when that happens because it is the only investment that might return more than a fraction of a percent.
If you are going to keep that much in cash, I might suggest putting some of it in inflation-protected securities like I-bonds. They are backed by the US government, and I can't forsee a situation where the government could default on them without the value of the dollar also tanking. They are better protected from inflation than money in a savings account.
I will look into something like the I-bonds more seriously.
Really this shouldn't be that controversial. It's super simple: Which does better long-term? Stocks or cash? That's pretty much all I'm saying. There's a ton of data to back up what I'm saying.
You have $100k. Put all of it in the stock market. The stock market drops by 40%, your investment is worth $60k and you withdraw $20k. The market goes back to 100% and now you have $67k in your portfolio.
If the market dropped by 80% your portfolio would be gone entirely. Meanwhile if you had enough emergency funds you would have kept everything.
The worse the emergency, the higher the ROI of the emergency fund. Since there is no upper bound for how bad an emergency can be the theoretical ROI of an emergency fund is also unbounded.
In this comment the definition of an emergency is a stock market drop combined with unexpected unemployment.
No offense but I'm pretty surprised you commented what you did. Literally my first sentence says "... before interest hits...".
But regardless I’m just saying you can use a credit card to buy time interest-free before you pay off the emergency with your salary/stocks/whatever. It’s better than taking a margin loan, no?
i mean that's not really an emergency.
An emergency is one such that if you weren't prepared for it, you can't handle it. For example, losing one's job can be considered an emergency (a short one, if you're in high demand).
A medical emergency is a good example of an emergency - to which you prepare for by purchasing insurance.
So by saying that a person's portfolio would perform better by ditching the emergency fund is just the same as saying 'take on more risk and get more return'.
Honestly your example is about as useful as me saying investing in stocks in general is bad, because sometimes, they go down. So what? We're talking about broad long-term averages here, nothing more.
It's fine to argue about personal psychological preferences, but as I say, this purely a mathematical statement I am making here. It should not be controversial, but it always is.
To me, an emergency fund is a hedge against various different risks like these (I am guilty of not being prepared for all of them):
1. A pandemic. For this I was ready even before we thought it's indeed possible - I have funds in several different banks (debit cards) that allow me to not have to visit a bank physically for several years (even if some of the cards expire in the meantime, or one bank suddenly goes bust)
2. AI glitch, identity theft, a bank holiday (this happened to me actually some years ago) that blocks you from accessing banks (and investment brokers if you have nowhere to withdraw your funds) for several weeks/months - for that you hold paper cash, physical gold and cryptocurrencies stashed at different physical locations.
3. Natural disasters - again some combination of diversified physical and virtual funds
4. Legal trouble - yes, even if you are not guilty you could get your funds blocked.
I presume you are from the US, hence the purple goggles ;) (I hope I'm not offending you)
I am personally too risk adverse to go taking loans all the time. But I can imagine it being a good option.
I work at a small prop trading firm and we run 10x or even more leverage most of the time. Without leverage, we wouldn't be able to run the vast majority of our strategies.
Basically, leverage is immaterial: what matters is the risk of the strategy. A leveraged strategy could be less risky than an unleveraged one.
Things that you should consider when deciding leverage: beta exposure, correlation to the market, volatility of the strategy, and the risk adjusted return of the strategy.
A classic example of this is risk parity: risk parity uses high leverage but is often safer than a classic 60/40 portfolio.
Diversification, Risk and Leverage https://cryptm.org/posts/2019/11/28/div.html
If I was rewriting the post today, I would make some changes, but by and large, I stand by the post.
Most information about trading either falls into the total bullshit camp designed for idiot retail investors, or complex papers/books designed for academics or professionals.
My blog tries to straddle the two: providing rigorous material but geared to those without a background in finance.
The calculations in the book use much more pessimistic annual interest rates than the 1% you quote, too.
I'm too risk averse to actually do this, even though I believe their arguments. However, it has convinced me that at least 100% stocks, 0% bonds is optimal, if we avoid margin (for a young person expecting a good job).
Source: work at a small prop firm that takes on around 10x leverage. Even at this leverage ratio, we are considerably less risky than the S&P 500. Even at 10x, our volatility is somewhere between 1/2 to 1/3 of the S&P.
If you take on very little directional risk and are doing stat arb like us, there's nothing wrong with taking on a lot of leverage. Even at 10x, we are safer than the vast majority of retail portfolios in existence.
Leverage (through futures, options, shorts, or borrowing) is the cornerstone of almost all active outperformance in the industry. Without leverage, you will be forced into high beta names that trade at a premium compared to their risk adjusted return. See the "low beta anomaly" for more information.
It's impossible to eliminate all risk, regardless of the leverage ratio. I'm just saying that leverage isn't a reasonable proxy for risk. You have to dig deeper.
But leverage necessarily decreases your risk adjusted return assuming non zero volatility of the strategy. This is called "volatility drag."
I looked up IBK and was surprised to st Industrial Bank of Korea
My american f&f (outside of silicon valley) think of wealth in terms of "saving for retirement." 401ks, tax strategies, etfs, stocks etc. It's very passive, probably "correct", and very unambitious.
The foreign side is totally different. They have very little interest in saving for retirement--they think in terms of investing in businesses. They don't buy etfs or stocks. They buy (small, then larger) businesses. It's very active and after age 40 or so takes up most of their time. The goal is to never retire, but rather to build a series of cash producing entities for ever.
Part of this is certainly cultural. In lots of the world, being a boss is higher status that being an *employee", regardless of the actual income each activity generates. The owner of a business with 200k in revenue is higher status than a McKinsey employee with a 500k salary.
This cultural difference is reflected in a desire to escape "wages" as soon as possible, not necessarily "save for retirement".
I don't think it has to do with that necessarily (at least in my cohort), it's just that many immigrants come from nations who haven't had stability in their financial systems, if they even had one to begin with. A business has tangible roots in a community and can generate revenue when there's a monetary collapse, which is much easier for someone to trust if they haven't grown up in a stable economy. My old country doesn't even have 30 year mortgages, for example. If it did, mortgages expiring now would have been signed right as the iron curtain was coming down, which drastically changed the Eastern bloc's financial systems almost over night.
What makes you say that?
Edit: Also you can be ethical.
A successful and competent employee has built relationships with colleagues, supervisors, and reports. He knows them, and they know him. He won't be asked to subjugate his principles to the company in an inappropriate way, in part because others know that he will go above and beyond within his principles to do well for the company.
For a business owner, the exact same thing, just replace colleagues et al with customers, suppliers, shareholders, and other partners.
On the other hand, a weak business and/or business owner will be very vulnerable to principle-based compromise. Out of the need to keep customers, suppliers, et al happy, he is subject to whim and every demand. Walking away from his business means the collapse of his reputation, failing his employees, and failing his family. He is no more free than your average entry level employee.
I respectfully disagree. Your team may not, your direct reports won't and your management hierarchy may not, however, your business will. If you have certain principles such as support for LBGTQ+, anti-military contracts, or a conservative in tech for example, and your company signs a contract to work with another organization that doesn't care about the cause or are completely against it, what happens? I know CEO's who can't fire bad clients because they don't own their own company.
>Walking away from his business means the collapse of his reputation, failing his employees, and failing his family.
Walking away from bad business can make you so much money it's hard to imagine. I've had conversations about doing business with shady people, which resulted in me making a deal with the person who had the same experience with the other individual.
>On the other hand, a weak business and/or business owner will be very vulnerable to principle-based compromise.
Growing pains, but an employee who is competent or incompetent will face the same dilemma because of what I suggested earlier.
I call it being a slave earlier, to intentionally raise alarm. I don't know of a way to define it but you don't have to go to sleep at night thinking, well, I didn't like that decision and now I need to change my entire life or deal with it. I.e. find a new job, change my commute, change my schedule, acquaint yourself with a new environment, meet new people and so on. An owner, is doing this on a daily basis already.
I guess things are changing, but historically refusing to serve customers based on political differences would be considered intolerant. You can disagree with someone without refusing them service. I don't see any ethical dilemmas in serving someone you disagree with. You are free to disagree with that principle.
For any business owner, making a decision to walk away from business on grounds of political disagreement is a huge luxury. I don't think it's commonly exercised, and for good reason, imo. This is very different from walking away from a "bad customer", one who may cost you money over the long run while sapping your soul. Empowered employees also feel capable of walking away from these customers because they understand the business so well that they see the issues coming, and they've earned to decision making respect for their choices to have weight.
> Growing pains, but an employee who is competent or incompetent will face the same dilemma because of what I suggested earlier.
This is exactly what I'm saying. The two are more similar than I think most people make them out to be. You will have differences in freedom, but those are often determined by your competence and success, more so than whether you have a business license.
The way you talk about a business owner sleeping well at night makes me wonder if you know any. Owning a business is extremely stressful. The buck stops with you, and while in theory you are free, your entire business depends on your decisions. You think it's hard to change jobs? How hard do you think it is to move on from a failed business? In a capitalist society, business owners are as much slaves as anyone else. The difference is, you take so much risk on that if you succeed, you end up making a return that does buy you a good deal of freedom. But that's not intrinsic to the business you own, and it is determined as much but what you need as what you have. It's a freedom derived from being a human being that has "enough".
Let's not separate a single example, the entire example list is as a whole, i.e. any of the situations listed are that to the person involved. Sure for you it doesn't, however, someone else will have a different opinion with respect to dealing with other political stripes. There are people who won't deal with other religions in this day and age.
>> Growing pains, but an employee who is competent or incompetent will face the same dilemma because of what I suggested earlier.
I typed this in a way it was not clear. The growing pains will heal. The competent and incompetent employees will always be slaves, their competence won't help them.
And yes, I sleep well.
Do you have experience where you succeeded as an employee without compromising on your principles as well?
Yes you may grow but your values will be forced upon you subconsciously.
Edit: The note I think about it, the more I'm inclined to disagree after all. A $500K McKinsey employee is not an entry level consultant. They are likely leading a large team and working regularly with C-level executives at enterprise businesses. They are going to have presence and gravitas because credibility is a huge part of their job.
What kind of business does $200K in revenue per year? It's very likely to be a sole proprietorship, maybe 1-2 employees at most.
I realize that there may be cultures and subcultures that truly believe the independence of the business owner makes them more respectable (although I personally believe that independence is a bit of an illusion), but I think more people would subconsciously assign a higher status to the first person and that it probably wouldn't be close.
Similarly, your potential investments for retirement savings can be quite limited. We're quite spoiled in the west to have massive stock markets with tens of thousands of stable, profitable companies. And a regulatory framework which means the chance you buy a stock and find out the entire company is a fraud is relatively low. I've heard from folks in some developing countries that they'd never put money in their own stock market - the chance of losing everything is way too high.
For developing countries, you often have a young, expanding population, and 7% GDP growth in one year wouldn't be seen as abnormal. Small businesses become a great way to get in on the growth (the market is often highly fragmented, so competition isn't that fierce) and businesses are a much more accessible way to wealth than any corporate job. The other avenue I've seen is real estate. In the SE Asian countries I've been in (the ones growing quickly), real estate is even more of a ticket to wealth than in the US. Seems like they can never build enough and in the big cities, prices aren't that different than non-coastal US ($100k+ USD), which is shocking considering the median salary is 1/10th that of the US.
>Compounding is easy to underestimate because it’s not intuitive, even for smart people. Michael Batnick once explained it. If I ask you to calculate 8+8+8+8+8+8+8+8+8 in your head, you can do it in a few seconds (it’s 72). If I ask you to calculate 8x8x8x8x8x8x8x8x8, your head will explode (it’s 134,217,728).
what does this have to do with anything. no kidding that multiplication is harder than addition (it requires many additions).
Using Microsoft and Bill Gates as an examples is major example of survivorship bias. What about the hundreds or thousands of other companies and founders that tried such an approach and still failed. Yeah, in hindsight anything Microsoft does will look like genius given how successful Bill Gates and Microsoft are. if Bill gates had policy of tying his shoes at work instead of at home, people would probably read into that as part of his success.
I am not sure this is all the story, the specific way in which you bet matters too.
Consider investing in daily leveraged ETFs in contrast with non-leveraged ones, for example.
Of course he was also a lier (vapor ware). And a cut throat business man.
You might like nowadays Bill Gates philanthropist, but there is a reason people hated him for decades. I don’t understand why retrospectives on him ignore this side.
You could say the same thing about any business person. And the bigger the business the bigger are the qualities you mentioned (or should I say they just cause bigger effect). It is obvious. Also it is not reserved specifically for business person.
Applying this to real world business concepts is interesting too - corona was a great example, and for all we know next year could be unrelated total world war, past has some indication of future trends but only when the sample size is substantially large (in the case of geopolitics and disasters, all known global history is an insignificant sample)
Dow also dropped >50% in GFC, so 2x leverage would've ended you.
Taking ultra risky bets when you are young is sensible because it isn't actually risky. This is because for a 30yo with good career prospects, your future career is probably worth an amortized $5 million dollars. If you have $200k in savings, that is only 4% of your true net worth. If you lose it, you still really have $5 million dollars. Therefore playing loose with it is pretty reasonable.
If you're 63 and will retire in 2 years, your amortized future career earnings are probably $200k and your assets $5million, and then you should be conservative.