This is a common dilemma in finance, the key is the possibility of outsized returns made possible with leverage. Let's say you have done well at your bank for t

This is a common dilemma in finance, the key is the possibility of outsized returns made possible with leverage. Let's say you have done well at your bank for the last X years and you have an audited track record somehow and a decent amount of saved bonuses. Time to go work for yourself. Option 1: hedge fund: take a large amount of outside capital, but also sink enough skin into the fund that your interests appear aligned. If things go well, you can become a billionaire within a decade. If things go badly, you're burnt out of the industry (with famous exceptions) and you've lost a significant part of your net worth. Option 2: start a prop shop or just trade your own assets, take no outside capital, go more slowly and take less risk (as less hunger for returns) and you might have a lower probability of burning it all, but you can only increase your net worth so much within the same decade. At most a few multiples of what you started with. If there's a bull market, the first strategy is especially attractive because a. you can level up like crazy because debt is cheap (on top of the investments in your fund which are also coming in cheap) b. everything goes up, so just find the more volatile stocks (e.g. tech) as they go up faster. This strategy has made many people rich but you need to find a way out before the crash, because you'll find the perfect storm of your financing terms tightening suddenly, your high volatility stocks cratering faster than the rest of the market (that's why you selected them!) and your LPs (investors) all wanting out at the same time. There'll be white knights but they'll take their pound of flesh. The prop shop partner on the other hand can wait out the crisis and buy the bottom or safely trade the volatility. He has comparatively less pressure on all of the above. These are the moments of greatest opportunity. I always thought the same applied to startups. Eschew massive financing if you can, aim for lower volatility markets, and start the thing in a downturn when you have less competition and people are more sensitive to quality, is a lower upside but higher probability of upside strategy.