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I think this maxim should be qualified as applying only to startup investing, and YCombinator investing in particular. If you're otherwise getting 20% returns,

by Eliezer 16y ago

I think this maxim should be qualified as applying only to startup investing, and YCombinator investing in particular. If you're otherwise getting 20% returns, investing 20% more money annually in losing investments will trash those returns. And 20% would be pretty good for the VC industry nowadays, or a hedge fund, or even Berkshire Hathaway. With investments like Heroku, YC is probably doing better than 20% and can afford a winner-based strategy - but this will rarely be a viable mode of thinking in finance generally.

vessenes 16y ago
Interesting. One way you just made me think of this is considering what a 'great' investment return is. Let's say it's 20%. If you're getting 20% already, you might as well expand your base looking for more 1000x returns, and not cry too much about bad placements; this investing business has a significant opportunity cost risk which means you probably want to err on the side of putting some money in. If you're over 'great' returns, you can afford to do that, and should. On the flip side, if you're under 'great' you probably want to figure out how to prune your choices away a bit first.