[mynameisme]

If you could provide information useful enough to provide a competitive advantage in investing, why provide it at all? Just invest in the companies yourself and put the millions in your own pocket.

To me, what it looks like (not saying it's true) is that it's a ycombinator shill company the backers of ycombinator are using to pump up other companies. After all, a lot of these companies are successful/bought out because of self fulfilling prophecies: they're successful because people think that they're successful.

[lightbritefight]

A competitive advantage is not a sure thing, its just an edge. Their tech could make a 90%/10% fail/win risk a 85%/15%, which would be a huge boon, but extremely dangerous for someone to place their life's savings on.

Speaking of, just because I may know a good investment, doesn't mean I have the resources to actually capitalize on it. I may know a likely way to make 10 Million/year, but if the buy in is 5 million, I'd be out of luck. Might as well sell that information to someone with 10 Million and make a cool 50k/100k for myself in the process.

During the goldrush, selling pickaxes and pans to miners was often a better way to get rich than to actually take the risk of mining yourself. You can see a modern day parallel in the custom bitcoin rigs. The companies selling them could just fire the machines up themselves. In the long run however, its better to sell the machine that could make 10k/yr for a guaranteed 2k in your pocket.

A bird in hand is better than two in the bush.

[mynameisme]

Say there is a game at a casino, that has a 1/100 chance of winning, and if you win, you get a payout of 100.01(original bet). You have $100. How would you play without it being extremely dangerous?

[btilly]

By the Kelly criterion, you should bet edge/odds of your bankroll. Your edge here is 0.01 * 0.0001 = 0.000001. Your odds are 0.01. Therefore you should bet 0.0001 of your net worth. So if you had a million dollars, that $100 bet would be a sensible investment. If you've only got, say, $100k then you should only bet for entertainment value.

The investment rule that underlies Kelly is to maximize the log of your net worth. Why? Bets multiply your net worth by a random factor, take logs and you're adding a random factor. In the long run a sum of independent random factors tends to converge to the expected value, so maximizing the expected log of your net worth will result in a strategy that with 100% odds will, in the long run, beat any other.

[mynameisme]

Sorry, I was being rhetorical, I guess it wasn't obvious. My point to the parent was that no need to bet your entire life savings on one company, you can split it among hundreds and take advantage of your edge.

[usujason]

Great question and it does make you think. I did notice the story quickly made the front page with very little up votes or maybe I just don't understand the ranking algorithm that HN uses.

[peterjancelis]

The best way to get rich in a gold rush is to sell the shovels.

[vinceguidry]

Is there really a gold rush going on? From everything I see, the startup market is maturing, not emerging.

[mynameisme]

Not if you know where the gold is buried and no one else does (which is what their purpose is). In your analogy, the shovels would be something like Meteor, or one of those "learn to rails in 24 hours!" startups.

[peterjancelis]

Or Mattermark just has slightly better shovels than the competition, and they know that focusing on keeping a slight lead in shovel making by selling a ton of shovels is more profitable in the long run than going for a single quick pile of gold asap.

Edit: Especially so if the gold doesn't want to be 'discovered' by just anybody. Founders have VC preferences.