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Comment by jmtame | Hacker News Reader

I don't follow your logic here. What rules do seed stage startups break when it comes to Black Swan theory?

It simply doesn't apply. A black swan is a rare event that is almost certain to happen (or at least one of them will) that will destroy vast amounts of wealth. Because they are so rare and it's so hard to predict which one will actually happen, people don't prepare for them so they do an incredible amount of damage to the financial system.

The idea is orthogonal to seed round investing.

It simply doesn't apply. A black swan is a rare event that is almost certain to happen (or at least one of them will) that will destroy vast amounts of wealth.

Black swan events are unpredictable and have enormous impact. Whether they're positive or negative is irrelevant. I'm reading the comments on this page and it seems many people are confused about the term. If you're interested in the connection to business and startups, check out this book: http://www.amazon.com/The-Black-Swan-Improbable-Robustness/d...

In the very first sentence of the book description, it defines a black swan event: "A black swan is an event, positive or negative, that is deemed improbable yet causes massive consequences."

It's used quite a bit to describe startup success. Paul Graham wrote about this in one of his essays as well. I think the term fits perfectly for this blog post.

It's true. I think so many of us assume black swans are negative because we first heard the term to describe the subprime mortgage mess.

Almost by definition, if it were a black swan, you couldn't hit 5/40 no matter how good or lucky you were.

I think that would make Sam Altman a really good seed investor. If you're looking at the odds of a startup succeeding big in general, it's way lower than 5/40.

The non-computability of the probability of the consequential rare events using scientific methods (owing to the very nature of small probabilities).

Success rate is computed and regularly measured by VCs. Otherwise rule of thumbs like 7/2/1 (On average 7 startups will just fail outright, 2 might make your money back, 1 will make you a profit) wouldn't exist.

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