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The idea that because it's risky right now and that a decrease in risk will provide higher returns isn't necessarily sound. For example, playing a financial eq

by trsh 4y ago

The idea that because it's risky right now and that a decrease in risk will provide higher returns isn't necessarily sound. For example, playing a financial equivalent to Russian roulette won't give you higher returns. You can look at the countries titled with the euphemistic "developing markets" which have historically had extremely high risks AND a much lower return than in lower risk countries. The risk-return trade-off may be assumed often, but there are controversies, and it's underlying theoretical basis only holds in an efficient capital markets where market participants are capable of pricing risk. A bank can price the risk of a mortgage default, but how can you price the risk of anything in the Blockchain space, like say Ethereum getting completely wiped out by a hack, etc?

killerstorm 4y ago
> You can look at the countries titled with the euphemistic "developing markets" which have historically had extremely high risks AND a much lower return than in lower risk countries. Hmm? Not sure what you mean. High-risk countries' bonds pay higher interest than low-risk countries' bonds. E.g. Ukraine was paying 10% interest in USD when US was paying 1%. Of course, expected value might be lower if you average over all such countries, but we are talking about a "happy case" here where a bad event did not happen. > how can you price the risk of anything in the Blockchain space, like say Ethereum getting completely wiped out by a hack, etc? Well, you can't calculate the risk but you can get 1000000% return (the actual return over 7 years for ETH presale). Or you can calculate the risk and get 5% return. It's your choice.
- polygamous_bat 4y ago
  > Well, you can't calculate the risk but you can get 1000000% return (the actual return over 7 years for ETH presale). Or you can calculate the risk and get 5% return. It's your choice. "Past returns are not indicative of future performance" is a mantra you will see everywhere in the financial world. If not doing any risk calculation whatsoever gives you 1000000% return them you didn't "invest" anything, you just gambled with it.
  - killerstorm 4y ago
    Is startup investing gambling? Please do not substitute a statistical model of something for the thing itself.

by trsh 4y ago

killerstorm 4y ago

> You can look at the countries titled with the euphemistic "developing markets" which have historically had extremely high risks AND a much lower return than in lower risk countries. Hmm? Not sure what you mean. High-risk countries' bonds pay higher interest than low-risk countries' bonds. E.g. Ukraine was paying 10% interest in USD when US was paying 1%. Of course, expected value might be lower if you average over all such countries, but we are talking about a "happy case" here where a bad event did not happen. > how can you price the risk of anything in the Blockchain space, like say Ethereum getting completely wiped out by a hack, etc? Well, you can't calculate the risk but you can get 1000000% return (the actual return over 7 years for ETH presale). Or you can calculate the risk and get 5% return. It's your choice.

polygamous_bat 4y ago
> Well, you can't calculate the risk but you can get 1000000% return (the actual return over 7 years for ETH presale). Or you can calculate the risk and get 5% return. It's your choice. "Past returns are not indicative of future performance" is a mantra you will see everywhere in the financial world. If not doing any risk calculation whatsoever gives you 1000000% return them you didn't "invest" anything, you just gambled with it.
- killerstorm 4y ago
  Is startup investing gambling? Please do not substitute a statistical model of something for the thing itself.