Heads You Win, Tails You Don't Lose Much
A lesson in opportunity.
Make more asymmetric bets. This is your missing ingredient to unparalleled returns on life.
What is an asymmetric bet?
An asymmetric bet is one that offers a disproportionately large return compared to the relatively small bet size.
A good example of an asymmetric bet is the buying and reading of a $20 business book. The risk of capital is quite low, however the book may provide the reader with information that goes on to make them thousands if not millions of dollars.
An asymmetric opportunity is simply one in which the upside is much greater than the downside. Acts where the potential pay off is massively higher than the cost of the act.
In baseball, analytics tell us that going 1-for-4 with one home run is better than going 3-for-4 with three singles.
The closer you can get your decision making to, “heads I win, tails I don’t lose much,” the better off you will be.
Imagine attending a cocktail party. You’re allocating 2-3 hours of your time, but you may find your future spouse, business partner, and/or best friend. Or hear about a job opportunity you are perfect for, have a conversation that sparks your next business idea, find funding for your startup, etc.
Certainly you would exchange two hours of your time to find your soulmate; but that does not happen without that small little amount of risk you take. The cocktail party might flop, the conversation might bore you, the food might be bland; but that is the risk you are willing to pay for potential asymmetric returns.
One of the biggest mistakes out there is to perpetually make decisions and follow paths that cap your downside without realizing that you are also capping your upside.
Sure, swinging for singles might result in less strikeouts than swinging for the fences, but in reality, you are hurting not only yourself but your team’s performance by doing so.
The decision making framework is as follows for becoming aware of and acting on asymmetric opportunities:
What is my maximum upside?
What is my downside?
Does my maximum upside outweigh my downside?
There’s your decision. This highly relates to creating positive expected value (EV) in your life (a topic for another day). The more asymmetric bets you can stack, the higher your upside becomes. 1000 cocktail parties versus 5 cocktail parties is unimaginably different asymmetrically. Throw in the understanding that asymmetric opportunities improve with volatility and the returns really become outsized. Go to lots of cocktail parties, but also go to cocktail parties you wouldn’t normally attend.
The hunting and deploying of asymmetric bets is ultimately your exploration, but because this is Capital Gaiter, I would be remiss if I did not mention the greatest asymmetric opportunity ever presented to humanity: Bitcoin.
In short, today you are being offered the chance to own a disproportionately advantageous amount of the entire world’s absolutely scarce money supply.
With the purchasing of Bitcoin, your upside is quite literally infinite, and your downside is your invested capital. Once you understand this, it seems logical to at least take a chance on Bitcoin.
The apex bet on Bitcoin is that it becomes the global monetary singularity. Once again, logically, it makes sense that for global prosperity to be maximized (a trend that has existed since the dawn of humanity), the world will converge on a single form of money to be used everywhere in the world.
Instead of the 180 fiat currencies in circulation today, wouldn’t it be better and more cohesive if there was simply one currency used everywhere, from the United States to Costa Rica to Thailand? You might find that tough to imagine, but if you believe the world is becoming more globalized in economic production and activity (hint: it is), you would be smart to believe that having one standard form of money laying the framework for global trade is most optimal.
If you believe that humanity advances technology in such a way to continuously optimize for productivity, innovation, and prosperity (the history of technological advancement would tell us this is true), you would be smart to believe that the world will one day have one global monetary standard to build around, because it is most optimal.
If you believe that one day the world will have one global monetary standard, the question becomes what monetary system can fulfill such a demand?
Monetary analysis would tell us that the form of money that can be used anywhere and sent anywhere instantaneously, is secured by a distributed and decentralized network bound by physics and the natural world, unable to be coerced and manipulated by central parties and bad actors, backed by cryptography and mathematical verifiability, entrenched in immutable code, digitally functioning, and absolutely scarce would be most optimal to perform as global money.
That is Bitcoin.
How is the upside to Bitcoin infinite?
Because global prosperity is infinite and Bitcoin is fixed to a finite supply of 21 million bitcoins. If Bitcoin is the global monetary singularity, all prosperity is priced in 21 million bitcoins. Infinity divided by any number is infinity. Global prosperity is infinite because we simply have no concept of how much prosperity can be created in 10, 20, 50, 1,000, 10,000, or 1,000,000,000 years. It is extremely difficult to even quantify how much prosperity currently exists.
Bitcoin is the ultimate asymmetrical bet and it is right in front of you. Heads you win and gain access to an infinitely valued asset, tails you lose whatever you put into it. There can be no greater asymmetrical opportunity than Infinity:X.
Do with that what you may.