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Regarding my assumptions, you're largely right... Though I take issue with: "(2) That you would invest your $4m in a low-return investment." My assumption is

Regarding my assumptions, you're largely right... Though I take issue with: "(2) That you would invest your $4m in a low-return investment." My assumption is that you'd invest in a BALANCED PORTFOLIO. What sort of return do you think a balanced portfolio would get you?

mrtron 16y ago
A balanced portfolio is a very inefficient portfolio. Many people would be willing to take risks, or don't want/need to hedge against everything. His real estate example is a good one - you are at the mercy of housing/renting markets. But over the long term these have been quite steady and wouldn't be outside most peoples' risk thresholds.
- webwright 16y ago
  No, a balanced portfolio aims to balance risk and return. If you put all of your cash into one (or many) high-risk-high-return securities, you run a meaningful risk of losing a big pile of your cash. There's a pretty well-understood playbook for wealth management. You SHOULD be willing to take risks (with a very specific % of your portfolio)... But at any given time some of these risks will have gone south, some will have gone north, etc. Feel free to find me a wealth manager who offers big double digit returns over multiple decades.
  - mrtron 16y ago
    The Warren Buffet school of thought on the issue is put your money into a few things you understand really well, and he is one of the better managers of our time. I understand the 'balanced' wealth management approach - I am just not sure it is the ideal way to go. Is pg better off dumping money in mutual funds, real estate, commodity index funds and bonds - or driving the majority of his wealth into YC? He lives and breathes startups - so even trusting the best managers I would say he would be foolish not to invest a lot into YC himself. I also would like to see the results of how bubbles, world wars, massive inflation, depressions and other difficult to hedge against events impact balanced portfolios vs someone dumping all their money into a single apartment building. My instinct is both would be equally screwed. And an event like that is almost certainly going to happen during the next 50 years. I don't disagree with you at all - there are just several angles.
djm 16y ago
When I read your comment I realised that I had made a rather foolish assumption myself - that most people would want to take risk. In practise most people do the opposite and seek to minimise their risk. Then again, your article was talking about startup founders, who (in general) presumably are quite willing to take risk!
- ewams 16y ago
  The goal is to retire though, have a steady source of income. It would make sense to have low risk in this scenario.

mrtron 16y ago

A balanced portfolio is a very inefficient portfolio. Many people would be willing to take risks, or don't want/need to hedge against everything. His real estate example is a good one - you are at the mercy of housing/renting markets. But over the long term these have been quite steady and wouldn't be outside most peoples' risk thresholds.

webwright 16y ago
No, a balanced portfolio aims to balance risk and return. If you put all of your cash into one (or many) high-risk-high-return securities, you run a meaningful risk of losing a big pile of your cash. There's a pretty well-understood playbook for wealth management. You SHOULD be willing to take risks (with a very specific % of your portfolio)... But at any given time some of these risks will have gone south, some will have gone north, etc. Feel free to find me a wealth manager who offers big double digit returns over multiple decades.
- mrtron 16y ago
  The Warren Buffet school of thought on the issue is put your money into a few things you understand really well, and he is one of the better managers of our time. I understand the 'balanced' wealth management approach - I am just not sure it is the ideal way to go. Is pg better off dumping money in mutual funds, real estate, commodity index funds and bonds - or driving the majority of his wealth into YC? He lives and breathes startups - so even trusting the best managers I would say he would be foolish not to invest a lot into YC himself. I also would like to see the results of how bubbles, world wars, massive inflation, depressions and other difficult to hedge against events impact balanced portfolios vs someone dumping all their money into a single apartment building. My instinct is both would be equally screwed. And an event like that is almost certainly going to happen during the next 50 years. I don't disagree with you at all - there are just several angles.

djm 16y ago

When I read your comment I realised that I had made a rather foolish assumption myself - that most people would want to take risk. In practise most people do the opposite and seek to minimise their risk. Then again, your article was talking about startup founders, who (in general) presumably are quite willing to take risk!

ewams 16y ago
The goal is to retire though, have a steady source of income. It would make sense to have low risk in this scenario.