[noddy1w]

A good thought experiment is to imagine a hedge fund which invests in the s&p500 all the time, but once per year takes all its capital and sells options with a 5% return and a roughly 1/20 risk of ruin. On average they beat the s&p500 by 5% every year, and only explode once every 20 years on average.

If you could charge 2 and 20 and smoothtalk investors the chances that you get rich before it explodes are pretty good.

Differentiating an investment with a negligible chance of going to zero (like the s&p500) from one with a small but nonzero chance is difficult until one of them explodes.