What are Asymmetric bets? They are bets where the potential upside is much higher than the potential downside. For example, if you invest $1000 with a potential return of $10,000 it is an asymmetric bet. However, if you invest $1000 with a potential return of $1000, it is a symmetric bet.
Well, the theory makes sense– so what? Asymmetric bets play in many day to day scenarios. Some examples below
- Trading (Financial) : Most common use case. Bet a small percent of your portfolio that can have outsized returns (with higher risk of course). For example investing in crypto when it was in the bull market in 2020/2021.
- Build a product : Use your linear time to build a product that addresses a customer problem and see it earn while you are sleeping (like Leverage)
- Buying a lottery ticket: Spend $2 and get in line for a shot at $20MM+
- Cold Calling / Hustling : This is an example of playing the numbers game. Use a large number workers to call millions of customers. A small conversion rate can generate handsome returns. This only works for high margin or high dollar product.
Am sure there are many more examples. Whether knowingly or unknowingly we all have made Asymmetric bets. I do try to make some conscious decisions on Asymmetric bets– As a consolation, it makes me feels better when the bet does not play out how I thought it would.