We're in a high variance world.
How much are you willing to pay for a coffee?
Starbucks did something incredible: they brought people’s willingness to pay for a coffee from $1 to $5. They did so by bringing extreme consistency to the experience: the coffee itself, the name on the cup, the baristas. You won't be disappointed by your Starbucks and you are ok paying a premium for that guarantee.
Nobody likes surprises anymore
The industrial world standardized everything: products are now similar, jobs are highly repetitive and require skills but no craft, and our education trains us to repeat situations seen in the past. We’ve lost our taste for adventure and surprises. As a society we have come to hate variance, and I believe we are paying a premium for it, just like with our daily Starbucks habit.
Security is overrated
We built entire systems for the general public based on lies:
we have people invest their money at 0.15% because it's 100% secure. But then you hear that the cost of capital is 8-9% ...
we push everyone to get a diploma 'in case they ever need it'
we sell people dreams of lifelong employment as civil servants
Nicholas Nassim Taleb explains in great detail why those systems are vulnerable to fat tail events and aren't as secure as they seem. But at the individual level, too, I think too many people make the wrong tradeoffs and surrender their freedom in the name of security.
We are losing the creative power of individuals and are capping potential outcomes to avoid bad surprises.
The world is changing
Information technology dramatically changed the economy: nobody is able to predict the future anymore. After all, who would have predicted Google wouldn’t have built any great product internally since Gmail?
Governments shouldn't try to standardize everything anymore, and as a society we should really embrace optionality. And yes, we need a safety net, an idea dear to my colleague Nicolas, for those who land on the wrong side of the equation.
But now it's time for risk-takers to shine: entrepreneurs, creators, influencers, chefs...
Embrace optionality
Risk isn't a bad thing per se, and we need to help people assess and take more risk.
Risk can never be totally eliminated, and doing nothing is probably a bigger risk than making the wrong decisions.
Only diversification can mitigate risk. No asset manager puts all of their money into gold, no matter how safe gold is considered to be.
As a (young) individual, don't park your money in products earning 0.5% interest, don't choose your education because it's safe, don't go work for large corporates with 40-year career plans. These were strategies for a society that thrived on large companies, cheap real estate, and heavy leverage.
Start your own businesses, join early stage companies, make multiple investments.
As a society, I believe we need to encourage risk and tolerate failure. To have people really succeed and push the world forward, we need to accept that others will fail, and that they'll be able to get up and try again, and again and again if that's what it takes.
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