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I did some real estate deals with guys from wealthy families a long time ago. We failed but the difference in consequences was enormous. I lost my savings of 10

I did some real estate deals with guys from wealthy families a long time ago. We failed but the difference in consequences was enormous. I lost my savings of 10 years and struggled getting out of the situation. The other guys got bailed out by dad, did more deals and are now very successful business people.

jbs789 2y ago
Sorry to hear. For the benefit of others, I read this as the importance of sizing the bet relative to your portfolio and nobody else’s, and is broadly applicable. If someone bets a million bucks on stock A, but is worth a billion bucks, then that’s not $1m conviction, it’s <1% conviction. And that information is then factored into the size of my bet. Unfortunately I also learned this the hard way.
- wadadadad 2y ago
  I really like the word conviction here for this concept and this use is new to me; has this been used before? A casual search for me doesn't term up anything.
  - jbs789 2y ago
    I really appreciate this comment! (I think that word just popped into my head given some professional experience recently rather than being sourced from the field.)
  - tracerbulletx 2y ago
    41 Jesus sat down opposite the place where the offerings were put and watched the crowd putting their money into the temple treasury. Many rich people threw in large amounts. 42 But a poor widow came and put in two very small copper coins, worth only a few cents. 43 Calling his disciples to him, Jesus said, “Truly I tell you, this poor widow has put more into the treasury than all the others. 44 They all gave out of their wealth; but she, out of her poverty, put in everything—all she had to live on.”
  - bhattid 2y ago
    There's a formalism in math/information theory describing this idea called the Kelly criterion. Not a common/colloquial phrase, but it describes a similar idea of portioning bet size according to percentage of available cash based on the risk of the bet.
- rqtwteye 2y ago
  Problem is that your bets have to be of a certain size to make a difference. Making 100% on $100 is not doing much good for you. So the guy with less money has to take much higher relative risks if he wants to get somewhere.
  - compsciphd 2y ago
    that's get rich quick mentality. get rich quick mentality is bad.
    - HeyLaughingBoy 2y ago
      Sometimes it's exactly the needed mentality. You can't always assume that you have all the time in the world to get to where you need to be.
  - creole_wither 2y ago
    Kelly Criterion
  - naveen99 2y ago
    If $100 doesn’t mean much to you, it probably isn’t 100% of your portfolio. Consider future cash flow from your labor in your portfolio.
deepnet 2y ago
Matching risk profiles with business partners or co-founders is vital and often overlooked Mostly Folk match expectations, I.e. upsides Downside fear is a very great motivator A lack of consequential downsides can make folk sensibly choose to cut their losses and move on. Sometimes this is invisible as parents bailing you out is not known before and may be a private discussion. All or nothing downsides can mean folk will work themselves close to death to win ( or just not lose ) It also effects how much someone will gamble to get a unicorn rather than settle for a comfy income Have the downside discussion early on

jbs789 2y ago

Sorry to hear. For the benefit of others, I read this as the importance of sizing the bet relative to your portfolio and nobody else’s, and is broadly applicable. If someone bets a million bucks on stock A, but is worth a billion bucks, then that’s not $1m conviction, it’s <1% conviction. And that information is then factored into the size of my bet. Unfortunately I also learned this the hard way.

wadadadad 2y ago
I really like the word conviction here for this concept and this use is new to me; has this been used before? A casual search for me doesn't term up anything.
- jbs789 2y ago
  I really appreciate this comment! (I think that word just popped into my head given some professional experience recently rather than being sourced from the field.)
- tracerbulletx 2y ago
  41 Jesus sat down opposite the place where the offerings were put and watched the crowd putting their money into the temple treasury. Many rich people threw in large amounts. 42 But a poor widow came and put in two very small copper coins, worth only a few cents. 43 Calling his disciples to him, Jesus said, “Truly I tell you, this poor widow has put more into the treasury than all the others. 44 They all gave out of their wealth; but she, out of her poverty, put in everything—all she had to live on.”
- bhattid 2y ago
  There's a formalism in math/information theory describing this idea called the Kelly criterion. Not a common/colloquial phrase, but it describes a similar idea of portioning bet size according to percentage of available cash based on the risk of the bet.
rqtwteye 2y ago
Problem is that your bets have to be of a certain size to make a difference. Making 100% on $100 is not doing much good for you. So the guy with less money has to take much higher relative risks if he wants to get somewhere.
- compsciphd 2y ago
  that's get rich quick mentality. get rich quick mentality is bad.
  - HeyLaughingBoy 2y ago
    Sometimes it's exactly the needed mentality. You can't always assume that you have all the time in the world to get to where you need to be.
- creole_wither 2y ago
  Kelly Criterion
- naveen99 2y ago
  If $100 doesn’t mean much to you, it probably isn’t 100% of your portfolio. Consider future cash flow from your labor in your portfolio.

deepnet 2y ago

Matching risk profiles with business partners or co-founders is vital and often overlooked Mostly Folk match expectations, I.e. upsides Downside fear is a very great motivator A lack of consequential downsides can make folk sensibly choose to cut their losses and move on. Sometimes this is invisible as parents bailing you out is not known before and may be a private discussion. All or nothing downsides can mean folk will work themselves close to death to win ( or just not lose ) It also effects how much someone will gamble to get a unicorn rather than settle for a comfy income Have the downside discussion early on