I guess one lesson is that for a lot people what seems like "risking everything" isn't really risking everything at all, you will in fact probably still be fine (and not homeless rough sleeping) even if you "lose".

This isn't the way the advice was framed, and I think you are right that it should be -- but the reframed advice can still be good -- I don't know about for startups, I think most startups are BS, and the comparison of someone "risking everything" to survive (a refugee) to an entrepeneur is frankly kind of offensive....

But for life anyway. Take a sober look at what you will really be losing if you lose. Is it in fact mostly about your self-image, and not about your material safety? Is it more inconvenience (even supreme inconvenience) than existential threat? Then take the risk for something you really want, for sure.

Those who actually risk everything, like, their lives (say, refugees in boats) do so because the alternative is existentially intolerable. The comparison to entrepeneurs is just... not actually ok. The better advice for those not facing existential threats to their humanity is probably more like... you aren't actually risking everything, you are nothing like these people, you'll be ok either way, so go for it. Which is actually pretty different than OP, yeah...

> Those who actually risk everything, like, their lives (say, refugees in boats) do so because the alternative is existentially intolerable. The comparison to entrepeneurs is just... not actually ok.

This is a great summary of the problems with this analogy, thank you. It's always annoyed me when people excuse the bad behavior of landlords and bosses exploiting low-income people with "well, they took a huge financial risk buying that building or starting that business!" Sure they did, but it was a risk to their ability to buy fancy organic steaks, not to their ability to continue breathing oxygen - and if it an unprofitable business investment _was_ going to put them on the street, then they should just go get a job like everyone else. The risks taken by landlord and tenant, by boss and laborer, are not comparable.

Thanks. I mean, not just a risk to their ability to buy fancy steaks, it may be (depending on their other options) a risk to their ability to access healthcare or pay for their kids college or go on vacations or retire someday. Things ain't great for the working class in USA!

But yeah, I agree with you. They are risking the challenges of having as hard a life as... their tenants or workers already have! At worst! (Then the risks of a refugee on a boat are another category yet again).

Yes but the answer to that should come from social security net and not from mechanisms that ruin the entrepreneur. That is the job of a good policymaker.

> The comparison to entrepeneurs is just... not actually ok.

True but I assume the author understands that difference , maybe he is riding a different wave just that both are looking at endless fall to the abyss.

Daniel Kahneman, in his book thinking fast and slow, has a really good insight on why people in bad situations keep taking bad choices.

Google "The fourfold pattern". Basically, he states that there's a cognitive bias where people in situations where a poor outcome is likely to happen, tend to risk too much, and not settle for a bad (but better) outcome that what they already have.

If they kept compounding these "bad but better choices", they might have a chance.

Just FYI, pretty much all of Thinking Fast and Slow has been caught up in the replication crisis and repudiated. I don't know about the fourfold pattern in particular.

Can you share your source, please.

(Not OP)

Here's one: https://replicationindex.com/2020/12/30/a-meta-scientific-pe..., discussed here: https://news.ycombinator.com/item?id=28917017

This is detailed pretty will in the book Scarcity, which highlights similar psychological effects among people who have not enough money, not enought time, not enough prestige, not enough room for caloric intake (dieters), etc.

I wish this book were more popular.

> not enough prestige

If someone had enough money, time, etc. but not enough prestige, how would it manifest itself?

"Risking everything" in a literal since, sure. Most people mean Risk everything non-essential and all of your gains. If you have 5,000$ saved up above your necessities to live, "Risking Everything" would be more in line with investing it all into AAPL, or investing it all into a food cart, not maxing out your credit cards and soaking family members or putting your family home up as collateral.

"poor kids" or people that don't have a ton of surplus savings can visit the casino, they just aren't playing the high stakes tables, they are playing penny slots.

>> Poor kids aren't visiting the carnival. They're the ones working it.

Speaking for myself, I'm kinda priviledged in working in the carnival, it's a good and steady income and I'm accumulating wealth, meaning I'm in a more economically privileged position than my parents and their parents were (housing crisis / cost of living aside, of course, sigh). That can, down the line, if I feel like it, be used as a springboard to do a throw.

And then you miss. You're 50 and broke. Back to square 1.

Plenty of poor kids visit the carnival. Having worked there, lots of kids walking around are poor.

> housing crisis

People have been screaming about a housing crisis for many years now, yet the percentage of owner occupied households is higher than it was compared to all of 1970-1990.

> Middle class kids can afford one throw.

*self funded

Once you have decent funding, the wealth of your parents shouldn’t impact you very much.

Some things it impacts includes:

1) Your safety net. If you lose, will they help you out so you at least aren't totally destitute?

2) Your social/professional network, and (correlationally) your access/ability to develop one, or funders and other technical assistance.

In this metaphor, once you have decent funding you are no longer a "middle class kid".

Whenever that comment comes up I feel the urge to just post the wiki entry for the Kelly criterion. If you don't have as many resources as your competitors in the market, reduce your bet size!!! Yes, that may mean you cannot challenge Mark Zuckerberg for yacht size just yet, but it will also mean that you can try again if you fail. Match your ambition to your means. Super risky plans with no room for errors make for great movies, but are terrible ideas in real life.

Of course, when you can barely afford to live, the Kelly criterion does not do anything at all for you. You have nothing that you can afford to lose. Not even miniscule bets.

If you accept the official poverty line as threshold, that'd be ~13% of people in the US. And the poverty line is ~$14k/year - even if you make double that, the amount of money you can risk is really pretty close to zero.

Any risk in that situation is a super-risky plan with no room for error.

It seems we agree that below the poverty line people should not make uncertain bets, because they have nothing they can afford to lose. Not betting when you can't afford it is exactly what the Kelly criterion proscribes, no?

You were replying to a person who were pretty clearly implying the position that the game is rigged. It's reasonable to assume your comment was meant to dismiss it as "you're just playing it wrong". I understand after your second comment that that was not the intention, but the first comment could be read as that.

> I feel the urge to just post the wiki entry for the Kelly criterion.

Apparently not that strong of an urge ;-).

For those (like me) who didn't know it yet: https://en.wikipedia.org/wiki/Kelly_criterion

> It is valid when the expected returns are known

Sounds like a great way to lose money.

I'm sure this is referring to the expected value in something like say, a dice throw. If the chances of winning when picking a certain number are 1/6 and the payoff is 6x the investment then the expected returns after a large mount of attempts are known and would be zero. I'm sure this is widely applicable in gambling.

Exactly the right term to use: Expected Value. If we have 1/6 chance of winning and each win gives us 6x, we have an EV of 0.

Poker is a great game to learn to understand EV/variance.

I wonder what the expected value of entrepreneurship is?

I rather suspect it is significantly negative, because most new businesses fail and the venture capital system means gambling with someone else's money.

Not to mention the rules are known in gambling, such as required minimum bets. Business has no such courtesy. The criterion is worthless if your small bets always result in failures because you need capital to get going.

If the preconditions arent met but you are sure they are, yes.

> Match your ambition to your means.

"Suck it up" as the ultimate in life advice to those born less lucky lacks a certain something to the more empathetic folks out there.

That may just be reality. The Disney movies telling everyone they can be princesses may be the cruel ones at the end of the day.

You will not have the same opportunities. Look closely at the ones you have and don't ignore them for sour grapes.

Anything more than "sucks to be you" requires opportunity or real costs and basically no one is willing to do.

Heck even the cases of tutorship are reserved for the lucky talented ones.

that is not analogous to 'suck it up' its calibration. Kelly criterion applied to blackjack for example. Play 5 dollar min bets, 100 max if you have a 30k purse and play perfectly. you wont withstand volatility iver 100 hours.

I hope this clarifies your misunderstanding

How do you reduce your bet size when you're betting years of your life?