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Comment by goldmab | Hacker News Reader

If Paul Graham realized that people can easily lose lots of money by investing, why did he devote himself to investing large amounts of his own money in high-risk businesses?

I'm not being facetious, I just think that seems contradictory. If I had a lot of money and that same knowledge, I would invest very conservatively.

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He sold Viaweb for tens of millions, he invests low tens of thousands.

He warns that careless trading may lose money without setting off fear, he invests in companies he also guides them to try and help them succeed. He doesn't invest alone, the risk and decisions have other people he trusts watching or contributing. They turn down most of the applicants

I bet he does a lot more due diligence on his YC investments than in the investments he references in his essay. He not only scopes talent and recognizes talent but also grooms it with his network and mentorship. He actively manages his "investments" to lower risk and increase chances of success.

The first couple YC batches were small enough that the money invested was probably a very small portion of what PG/Robert/Trevor earned from Viaweb.

For later batches, it had become evident that YC's model was promising, and YC also raised money from outside LP's.

What's an LP?

Limited Partners

http://en.wikipedia.org/wiki/Limited_partnership

At a certain level of diligence and diversification, investment is much more like a job than it is like gambling.

If people could talk to the managing team of the companies they invest in for just about 3 minutes, it would be a lot less risky and a lot less money would get lost.

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