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Managing fat tail risk is only sexy after the fact. If your business is currently structured such that you are burning cash and have no profits or ways to effec

Managing fat tail risk is only sexy after the fact. If your business is currently structured such that you are burning cash and have no profits or ways to effectively slow burn (like cutting dividends, laying non-essential staff that can quickly be recruited during recovery) then your business is at high risk of failing instantly when an event of 3 standard deviations or more takes hold. If you’ve been running this business for a decade and have not thought about this, you’re negligent or incompetent. If anything the wool should be off everyone’s eyes that you’re not special - you’re just lucky to be there collecting a fat check doing what almost anyone could. Which is looking like a genius during a bull market.

hn_throwaway_99 7y ago
So says the peanut gallery. > laying non-essential staff that can quickly be recruited during recovery That's pretty much my point. AirBnB could lay off a ton of people to slow their burn, but if they can get financing, they don't have to. I'm not sure why you see that as a failing.
- nemo44x 7y ago
  They were forced to sell a billion dollars worth of stock at half their previous valuation. And if they don’t succeed then they have to pay back a billion dollars at 10% interest. So yeah I get they get to keep people and that’s good. But they were forced into making a bad deal. They’ve taken on 16% of their total raise to date and did it at half value. Someone got a potential 2 for 1.
travisjungroth 7y ago
your business is at high risk of failing instantly when an event of 3 standard deviations or more takes hold. That’s 99.7th percentile if I understand you right. That seems like something reasonable to think about, and then accept the risk. It seems pretty bold to call them incompetent.
yibg 7y ago
I think if every company, especially not yet profitable "startups" planned for 3 black swan events we won't have many new companies. They'll just end up spending all their time, energy and money on the once in a hundred year events.

hn_throwaway_99 7y ago

So says the peanut gallery. > laying non-essential staff that can quickly be recruited during recovery That's pretty much my point. AirBnB could lay off a ton of people to slow their burn, but if they can get financing, they don't have to. I'm not sure why you see that as a failing.

nemo44x 7y ago
They were forced to sell a billion dollars worth of stock at half their previous valuation. And if they don’t succeed then they have to pay back a billion dollars at 10% interest. So yeah I get they get to keep people and that’s good. But they were forced into making a bad deal. They’ve taken on 16% of their total raise to date and did it at half value. Someone got a potential 2 for 1.

travisjungroth 7y ago

your business is at high risk of failing instantly when an event of 3 standard deviations or more takes hold. That’s 99.7th percentile if I understand you right. That seems like something reasonable to think about, and then accept the risk. It seems pretty bold to call them incompetent.

yibg 7y ago

I think if every company, especially not yet profitable "startups" planned for 3 black swan events we won't have many new companies. They'll just end up spending all their time, energy and money on the once in a hundred year events.