Michael Dickens


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My understanding is that VCs only invest in about 1% of startups, even though probably 5-10% of startups have reasonably good stories for why they'll be super successful, and where you could argue "surely they have at least a 0.1% chance of succeeding, so let's invest in all of them." If VCs lowered their standards by 5-10x, they would not make any money; that's what I was trying to say.

The question isn't how do you distinguish bitcoin from the 1% of startups that are worth investing in; it's how do you distinguish it from the 5-10% of startups that look like they're worth investing in according to the arguments in OP?

I am not convinced that people in 2011 should have bought bitcoin. If you gave 2011 me the epistemic skills of 2018 me, I would not have bought bitcoin. I don't know how one could reliably distinguish bitcoin from, say, a penny stock that makes promises of 10,000x growth.

Or perhaps a slightly stronger argument would be venture capital. Many startup founders have plausible stories of why their company will one day be worth billions of dollars. Surely it's worth investing even if there's a 0.1% chance that they are correct? But if VCs invested in every company with a story they thought was 0.1%-plausible, they wouldn't make any money.

If you could figure out a general epistemic strategy that would lead to buying bitcoin in 2011 but not buying penny stocks, or not investing in the wrong startups, that would be great. I don't know how to do that.

This is especially a concern in markets, where making an argument that an asset will appreciate isn't enough; you have to also explain why other people (including very smart people, and people whose entire job is to find assets that will appreciate) haven't done it already.