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We all make stupid mistakes. Some of these mistakes included being scammed. We all heard of people who got fooled by the classic Nigerian prince scam and think

by kiba 2y ago

We all make stupid mistakes. Some of these mistakes included being scammed. We all heard of people who got fooled by the classic Nigerian prince scam and think "it can't possibly be me". It may indeed not be you but you might be more vulnerable to a different kind of scam. I am more interested in developing the mechanism and knowledge it would take to avoid making those kind of mistakes.

throwup238 2y ago
> I am more interested in developing the mechanism and knowledge it would take to avoid making those kind of mistakes. Step #1: do your due diligence. Usually that means hiring experts to do it for you if it’s outside your field of expertise. Biotech VCs have a stable of expert consultants in many subfields of science and medicine to do the reviews for them, as well as accountants to go to for financials. That’s it. There are no more steps. Doesn’t matter whether its a founder asking for capital or a nigerian prince asking for a wire transfer. Theranos’ investors did not do their due diligence and paid the price.
nradov 2y ago
I am not vulnerable to any kind of scam.
- DonHopkins 2y ago
  That's the kind of unjustified fake confidence you can only learn at an expensive motivational seminar.
  - nradov 2y ago
    Really? I've never been to a motivational seminar. I heard that they're scams. Sometimes confidence is justified.
mrandish 2y ago
I've successfully taken a variety of calculated risks over several decades which have all worked out as expected. That's not to say all were successful but none turned out to be scams or materially different than I thought. The ones that failed did so for reasons I was aware of and estimated risks of before hand. I had a set of rules which I wouldn't break Risk Rules: 1. Only take significant risks in domains in which you have substantial first-hand experience, expertise and which you understand deeply. 2. Spend significant time deep diving on the specific opportunity (due diligence). 3. Write out your investment thesis in detail including calculating the risk and return. Include a bullet point list titled "Everything that has to be true for this to work." Put percentage odds next to each bullet. 4. Before leaping always ask yourself "If this goes completely bust, will I not regret it because it was for reasons I knew about and I can honestly say 'given the same opportunity, I'd make the same bet again'?" This is important because the nature of risk is that sometimes it doesn't pay out but the potential reward is worth the potential loss when averaged over multiple bets. The people I know who tend to have 'regrettable losses' also tend not to have a well-grounded understanding of how economic value works in principle. They're the kind of people who assume others get rich by "getting in on the new thing before everyone else does." While it's true this can happen, it's not what I'd consider a workable long-term plan. It's true that these rules have resulted in "missing out" on some opportunities which turned out very well for others. For example, I had some friends who were fairly early into bitcoin and did quite well. I looked into it at the time and I understood the principle while also liking the idea of decentralized currency in concept. But I ultimately passed because I just didn't feel I had enough background knowledge of the cryptocurrency domain and, because I'd recently launched a startup, I wasn't at a place where I had the time/mental energy to devote to learning and tracking the evolution of the crypto marketplace to know when to sell. Essentially, my "risk bandwidth" was already committed to a high-risk, high-return bet (and the startup bet worked out very well - in part because I was 100% focused on it). I have zero regrets about "missing out" on early bitcoin because I'm confident that pursuing bitcoin would have put my startup at (greater) risk. Also, when I made the choice to pass on bitcoin, I acknowledged that it very well might "go to the moon" and I'd be missing out, but I was confident both then and now that I was making a difficult but well-informed choice. I think that's why, when I reflect on that choice, it's never evoked a feeling of regret. The same principles and strategy that minimizes regret on losing bets that were properly taken, should also minimize regret on winning bets that were properly not taken. Another example is that during my multi-decade career as a serial tech startup entrepreneur I had most of my net worth tied up in my startups but as I made enough to set aside some into investments, those investments were entirely in a relatively conservative, long-term diversified portfolio (eg standard 'bogglehead' investing strategy). And I only looked at the portfolio once a year. My reasoning was simply that I was already exposed to more than enough financial risk (and potential reward) in my startups to take on any more volatility. Another way to put it is to evaluate, revise and optimize your risk strategy, not individual bets. As long as each bet is properly executed under the strategy, you don't regret individual bets, only the execution or strategy - which can be changed or improved going forward.

by kiba 2y ago

throwup238 2y ago

> I am more interested in developing the mechanism and knowledge it would take to avoid making those kind of mistakes. Step #1: do your due diligence. Usually that means hiring experts to do it for you if it’s outside your field of expertise. Biotech VCs have a stable of expert consultants in many subfields of science and medicine to do the reviews for them, as well as accountants to go to for financials. That’s it. There are no more steps. Doesn’t matter whether its a founder asking for capital or a nigerian prince asking for a wire transfer. Theranos’ investors did not do their due diligence and paid the price.

nradov 2y ago

I am not vulnerable to any kind of scam.

DonHopkins 2y ago
That's the kind of unjustified fake confidence you can only learn at an expensive motivational seminar.
- nradov 2y ago
  Really? I've never been to a motivational seminar. I heard that they're scams. Sometimes confidence is justified.

mrandish 2y ago

I've successfully taken a variety of calculated risks over several decades which have all worked out as expected. That's not to say all were successful but none turned out to be scams or materially different than I thought. The ones that failed did so for reasons I was aware of and estimated risks of before hand. I had a set of rules which I wouldn't break Risk Rules: 1. Only take significant risks in domains in which you have substantial first-hand experience, expertise and which you understand deeply. 2. Spend significant time deep diving on the specific opportunity (due diligence). 3. Write out your investment thesis in detail including calculating the risk and return. Include a bullet point list titled "Everything that has to be true for this to work." Put percentage odds next to each bullet. 4. Before leaping always ask yourself "If this goes completely bust, will I not regret it because it was for reasons I knew about and I can honestly say 'given the same opportunity, I'd make the same bet again'?" This is important because the nature of risk is that sometimes it doesn't pay out but the potential reward is worth the potential loss when averaged over multiple bets. The people I know who tend to have 'regrettable losses' also tend not to have a well-grounded understanding of how economic value works in principle. They're the kind of people who assume others get rich by "getting in on the new thing before everyone else does." While it's true this can happen, it's not what I'd consider a workable long-term plan. It's true that these rules have resulted in "missing out" on some opportunities which turned out very well for others. For example, I had some friends who were fairly early into bitcoin and did quite well. I looked into it at the time and I understood the principle while also liking the idea of decentralized currency in concept. But I ultimately passed because I just didn't feel I had enough background knowledge of the cryptocurrency domain and, because I'd recently launched a startup, I wasn't at a place where I had the time/mental energy to devote to learning and tracking the evolution of the crypto marketplace to know when to sell. Essentially, my "risk bandwidth" was already committed to a high-risk, high-return bet (and the startup bet worked out very well - in part because I was 100% focused on it). I have zero regrets about "missing out" on early bitcoin because I'm confident that pursuing bitcoin would have put my startup at (greater) risk. Also, when I made the choice to pass on bitcoin, I acknowledged that it very well might "go to the moon" and I'd be missing out, but I was confident both then and now that I was making a difficult but well-informed choice. I think that's why, when I reflect on that choice, it's never evoked a feeling of regret. The same principles and strategy that minimizes regret on losing bets that were properly taken, should also minimize regret on winning bets that were properly not taken. Another example is that during my multi-decade career as a serial tech startup entrepreneur I had most of my net worth tied up in my startups but as I made enough to set aside some into investments, those investments were entirely in a relatively conservative, long-term diversified portfolio (eg standard 'bogglehead' investing strategy). And I only looked at the portfolio once a year. My reasoning was simply that I was already exposed to more than enough financial risk (and potential reward) in my startups to take on any more volatility. Another way to put it is to evaluate, revise and optimize your risk strategy, not individual bets. As long as each bet is properly executed under the strategy, you don't regret individual bets, only the execution or strategy - which can be changed or improved going forward.