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Comment by wing-_-nuts | Hacker News Reader

The question of consequences is real. I graduated in 2008 at the beginning of the great recession, and I watched some of my classmates go off and do startups. I asked them 'Dude, what if you fail?!' and one of them just shrugged his shoulders and said he'd move back home with his parents, and get a job at his dad's company. No big deal.

That's when I realized it was much easier to take those risks when you knew you had a safety net to fall back on and you didn't have to worry about winding up homeless sleeping under an overpass.

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I did some real estate deals with guys from wealthy families a long time ago. We failed but the difference in consequences was enormous. I lost my savings of 10 years and struggled getting out of the situation. The other guys got bailed out by dad, did more deals and are now very successful business people.

Sorry to hear. For the benefit of others, I read this as the importance of sizing the bet relative to your portfolio and nobody else’s, and is broadly applicable.

If someone bets a million bucks on stock A, but is worth a billion bucks, then that’s not $1m conviction, it’s <1% conviction. And that information is then factored into the size of my bet.

Unfortunately I also learned this the hard way.

I really like the word conviction here for this concept and this use is new to me; has this been used before? A casual search for me doesn't term up anything.

I really appreciate this comment! (I think that word just popped into my head given some professional experience recently rather than being sourced from the field.)

41 Jesus sat down opposite the place where the offerings were put and watched the crowd putting their money into the temple treasury. Many rich people threw in large amounts. 42 But a poor widow came and put in two very small copper coins, worth only a few cents.

43 Calling his disciples to him, Jesus said, “Truly I tell you, this poor widow has put more into the treasury than all the others. 44 They all gave out of their wealth; but she, out of her poverty, put in everything—all she had to live on.”

There's a formalism in math/information theory describing this idea called the Kelly criterion. Not a common/colloquial phrase, but it describes a similar idea of portioning bet size according to percentage of available cash based on the risk of the bet.

Problem is that your bets have to be of a certain size to make a difference. Making 100% on $100 is not doing much good for you. So the guy with less money has to take much higher relative risks if he wants to get somewhere.

that's get rich quick mentality. get rich quick mentality is bad.

Sometimes it's exactly the needed mentality. You can't always assume that you have all the time in the world to get to where you need to be.

Kelly Criterion

If $100 doesn’t mean much to you, it probably isn’t 100% of your portfolio. Consider future cash flow from your labor in your portfolio.

Matching risk profiles with business partners or co-founders is vital and often overlooked

Mostly Folk match expectations, I.e. upsides

Downside fear is a very great motivator

A lack of consequential downsides can make folk sensibly choose to cut their losses and move on.

Sometimes this is invisible as parents bailing you out is not known before and may be a private discussion.

All or nothing downsides can mean folk will work themselves close to death to win ( or just not lose )

It also effects how much someone will gamble to get a unicorn rather than settle for a comfy income

Have the downside discussion early on

Family is easier, but you can also build up a support network with close friendships too. It doesn't necessarily come for free, but it's certainly possible. That isn't to say it's equal, especially when it comes to money.

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