Buy crypto while I'm awake, sell about ten minutes before I wake up.
Ask HN: What are examples of activities/bets with asymmetric upside?
41–50 of 100 posts
Re: Ask HN: What are examples of activities/bets with asymmetric upside?
#42The lottery. Honestly it bugs me a bit that I don't know the right way to model it - because so often people will slate it for having a terrible expected return (E[X]), but.. some very high percentage of us here could play every single week without noticing it (negligible downside), and yet winning however slim the chance would be somewhat life changing - even if it wouldn't make you quit work it'd be a nice windfall…
The value is not in the winning part, it's in dreaming of winning. Compare that to a movie ticket, not an investment. At least before it becomes a habit. I'd guess people who buy one lottery ticket every year get much more enjoyment out of it than those who buy one every week.
I don't play either. I suppose it's a nice game if you can temporarily forget some leading zeroes.
Re: Ask HN: What are examples of activities/bets with asymmetric upside?
#43The lottery. Honestly it bugs me a bit that I don't know the right way to model it - because so often people will slate it for having a terrible expected return (E[X]), but.. some very high percentage of us here could play every single week without noticing it (negligible downside), and yet winning however slim the chance would be somewhat life changing - even if it wouldn't make you quit work it'd be a nice windfall…
Opportunity costs make the lottery a poor option. If you could only invest money in the lottery and nothing else, sure, it's better than no chance of multiplying your income. But if you invest in an index fund, there's a very high chance of getting a 15-30% return on investment, versus a near-guaranteed amount of just losing the money spent on the lottery. It may not seem like a lot each ticket, but the costs add up…
A 30% return on the amount spent on tickets would not improve quality of life drastically for most people. Winning a big jackpot would. That creates a situation in which expected value might not be the best metric. Measuring it in expected quality of life, for example, would favor playing for many people including likely most reading this.
Re: Ask HN: What are examples of activities/bets with asymmetric upside?
#44The lottery. Honestly it bugs me a bit that I don't know the right way to model it - because so often people will slate it for having a terrible expected return (E[X]), but.. some very high percentage of us here could play every single week without noticing it (negligible downside), and yet winning however slim the chance would be somewhat life changing - even if it wouldn't make you quit work it'd be a nice windfall…
Opportunity costs make the lottery a poor option. If you could only invest money in the lottery and nothing else, sure, it's better than no chance of multiplying your income. But if you invest in an index fund, there's a very high chance of getting a 15-30% return on investment, versus a near-guaranteed amount of just losing the money spent on the lottery. It may not seem like a lot each ticket, but the costs add up…
> there's a very high chance of getting a 15-30% return on investment
Average yearly return for index fund since 1957 has been around 10%. It's been wild recent years but that should be seen as an exception.
Though you didn't specify the time period. So if you meant longer period, then fair enough.
Re: Ask HN: What are examples of activities/bets with asymmetric upside?
#45Learning programming.
This is a good example, but I've found that this benefit is actually non-obvious to people in the beginner stages of learning.
A popular view before starting to learn is that everyone should "learn to code" because programming jobs are in-demand and pay well (at the pre-beginner stage). Then, when many learners actually start to learn, it can take months to write a genuinely useful program. All the way, you might learn how to do arithmetic in Python and write loops, without a seemingly practical purpose (just seemingly-contrived exercises). I admit that this actually put me off programming for a while, because I couldn't see the upside.
Eventually, a web scraper became helpful for a project, along with a better understanding of programming for tweaking a website. Then I went back to studying, and it helped me greatly to have very specific goals. So, while "learning programming" is correct, I think it will help people stick with it, if specific outcomes are emphasizes (e.g. "learn automation through programming" or "learn website application development through programming").
Re: Ask HN: What are examples of activities/bets with asymmetric upside?
#46Asking for a raise or a promotion. The squeaky wheel gets the grease.
There may be toxic environments where there is a large downside - losing your job - but I hope that is not the case for most who are reading this comment.
Re: Ask HN: What are examples of activities/bets with asymmetric upside?
#47> Investing in call options on AMD in 2014 or Tesla in 2019 also had huge asymmetric upside. It was clear that these stocks had massive risks, but while the upside wa potentially s huge, the downside was capped at -100%. This is a terrible example. No one knew that the stocks would skyrocket. So at the time it was asymmetric on the downside because the cost of options were ridiculously expensive.
I don't know where he gets the 2014 AMD thing from, but investing in AMD in 2016/2017 was the easiest money I've ever made. I think there is a massive information asymmetry[1] in this space. If you could interpret both the leaks and the news related to AMD Zen, and Intel process being mega fucked, it was an investment with the odds highly in your favor. So basically invest in things where there is a big information a…
Biggest regret was taking a hedge fund job and liquidating my 5k$ of amd because I didn’t want to deal with the paperwork
Re: Ask HN: What are examples of activities/bets with asymmetric upside?
#48The lottery. Honestly it bugs me a bit that I don't know the right way to model it - because so often people will slate it for having a terrible expected return (E[X]), but.. some very high percentage of us here could play every single week without noticing it (negligible downside), and yet winning however slim the chance would be somewhat life changing - even if it wouldn't make you quit work it'd be a nice windfall…
I knew a fella who systematically bought call options. He would lose most of the time. However, once he bought AAPL calls (many years ago) and rolled over the winnings to buy more. Turned 10k to several million. He structured his investments to be able to do this, with a portion of it generating "play money" for these wild bets. He'd accept that his investments would thus generate lower returns due to his betting, bu…
due to the odds involved in winning lottery, lottery is basically a tax on people who do not know maths
Re: Ask HN: What are examples of activities/bets with asymmetric upside?
#49Earlier quoted context omitted.
Where’s the huge upside though? You need a roof over your head so if your property goes up 10%, so has every property you’re likely to want to move to when it comes time to sell. You only really benefit if you’re investing outside of your primary residence. What’s more, the risk is huge. In the AMD example, you could lose 100% of your investment. Get things wrong with a house and you’re going to be out way more than…
> You need a roof over your head so if your property goes up 10%, so has every property you’re likely to want to move to when it comes time to sell. I think this common argument massively overstates the case. I have friends whose parents left them their primary residence. Mine did not. "Where’s the huge upside though?" sounds to me like sort of an insane question, when viewed through that lens. But just to lay out th…
> I have friends whose parents left them their primary residence. Mine did not.
I fail to see how that factors in to buying a property. You have friends who benefited from an inheritance.
> Owning a house in San Francisco is like having a standing offer of a million dollars to move to the Midwest.
Owning a house in the Midwest is like having an $xyz offer to move to . The offer exists whether you take it or not.
You could sell up and live in a tent too.
I don’t believe most people are willing to uproot their lives simply because they can get cheaper housing elsewhere. I’m sure it factors in but it’s rarely the driving motivator.
I think some of the points you made were fair. As a homeowner for instance you do generally have access to cheaper capital.
> You can borrow against your equity.
What equity? You advocated for putting as little as 5% down. You’re already going to have a higher than average interest rate and with such a small deposit it’ll be easy to tip into negative equity.
You only see the benefit years down the line and that relies on house prices rising in the short term.
> Because you can buy with so little down, having a lot of equity means it's pretty easy to buy again,
I’m not really following this argument. You’re suggesting buying with a small downpayment. You don’t have a lot of equity.
Re: Ask HN: What are examples of activities/bets with asymmetric upside?
#50Options in general have asymmetry built in; that's the point of using them for risk-management. The idea is that the buyer pays a flat amount for the privilege of limiting the downside risk, and the seller is expected to know what they're doing and rake in that flat fee in exchange for being able to handle the rare-but-severe unlimited downside.