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Scott argues that Bitcoin is an example of why rationalists need to be more confident in their results — I’d argue it’s an example of where they should be much more modest. Hindsight bias is in play here. The line of reasoning that “this investment has a 1/10000 chance of going huge, and a 9999/10000 chance of being at best a waste of time, so I should invest” is not a rational strategy by itself. If you applied this logic to every moon-shot investment you came across you’d barely break even between the few winners and thousands of losers. You need to know something more interesting about the investment than “this could go to the moon”. Otherwise you’re spending all your time buying and then losing money in penny stocks. You also have to hold onto Bitcoin much longer than seems rational. It’s rare to find that someone buys Bitcoin at $1 a coin, and doesn't sell at $1000/coin. A 1000x return is the definition of moon-shot. Scott claims that “most people” agreed Bitcoin had a more than 1/10,000 chance of achieving $10,000 a coin — but this is a totally non-obvious result to me. Maybe it’s 1/1000 chance of a price of $1,000? A 1/100,000,000 chance of $100,000? In 2011, how could you reliably make such a precise prediction? For a community centered around epistemic modesty, such a finely calibrated probability like that seems unreasonable. And for the record — Bitcoin was expected to grow in price proportional to its value as a currency, tool, technology, etc. Nobody said “I’m going to buy Bitcoin because it’s going to enter into a giant speculative bubble and I want to be on the bottom”. Nobody seems to know why Bitcoin has exploded in price, so I’m hesitant to award points to rationalists. Seems more like a case of “correct by coincidence”. You made statistical inferences and acted on the result, and ended up being right, but not for any of the reasons that your statistical inference is based on. |
You would become... a VC
Their method is to just select the moonshots on the basis of some common characteristics with previous moonshots