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Ask HN: What are examples of activities/bets with asymmetric upside?

• giantg2 4y ago
  "For example, usually asking someone out on a date has huge asymmetric upside. You might hit it off and end up being in a happy relationship. If not, you'd just be a little embarrassed and maybe awkward with the person afterward." Or it goes so "well" that you get married and they take half your stuff in a divorce.
  • threeseed 4y ago
    I guess the asymmetric upside is you asking someone on a date who is extremely successful. Then it goes so "well" that you get married and then you take half their stuff in a divorce.
• MilnerRoute 4y ago
  Here's my favorite example -- in the form of a story. A bunch of friends visits a young guy who recently moved to Las Vegas. "Here's how we get twenty bucks in Las Vegas," he boasts to his friends, putting $20 on the roulette wheel for black. When it comes up red, he puts down a $40 bet, bragging that "I'll keep increasing the size of my bet until I make back my money -- plus another $20!" One time he'd had to double his bet four times in a row, but he's convinced that his system works, and does it every time company comes to visit. Do you see where this is going? One day he hits a horrible streak. Five times in a row he's lost the bet. (So, $20, $40, $80, $160, $320.) Now he's got to bet another $640 -- and hope that he wins. (It's getting awkward, with all his friends watching him lose, feeling bad for him...) At some point his wallet is out of cash, and he's slinking back to the in-casino ATM machine. (And the bank balance isn't infinite either...) Conclusion? This particular strategy has an asymmetric downside. More often than not, you'll walk away with $20. But the casino knows that sooner or later you'll have that one very bad day where they'll get it all back.
  • valdagger 4y ago
    Classic martingale. Never fails to capture the imagination.
    • fb03 4y ago
      I coded this strategy as a roulette simulator (to learn me some Rust). You are guaranteed to win a few but as you keep playing, your loss goes to negative infinity. https://github.com/flipbit03/roulette_simulation https://github.com/flipbit03/roulette_simulation
  • myroon5 4y ago
    Casinos also usually have bet minimums and maximums to thwart things like this
  • threeseed 4y ago
    The other thing is that in Las Vegas at least casinos are private property. So if you keep winning they have the legal right to just throw you out.
  • xelxebar 4y ago
    This is an good point. From the perspective of a casino, most of their games have asymmetric upside.
  • defrost 4y ago
    This is why wearable computers were invented . . . [1] https://en.wikipedia.org/wiki/The_Eudaemonic_Pie https://en.wikipedia.org/wiki/The_Eudaemonic_Pie
  • throwaway_4ever 4y ago
    Counting blackjack at casinos actually has asymmetric upside as OP words it. Most of the time, you're placing minimum bets slowly losing at -0.5% EV a hand, gaining information on the count. But when the count is high, you're making 8-10x bets at 1 - 2.5% EV and raking in so much, on average, that you come out ahead at like EV 1%.
  • 4y ago
• recursivedoubts 4y ago
  capture a regulator and have them put your competitors out of business bribe politicians to use your countries armed forces in your companies interests get the government to cover any downsides of your product be the child of a politician and offer consulting services found a central bank there are lots more
  • oaththrowaway 4y ago
    All of these are correct
  • no_time 4y ago
    >found a central bank Any udemy courses for this one?
    • recursivedoubts 4y ago
      https://www.amazon.com/Creature-Jekyll-Island-Federal-Reserve/dp/091298645X https://www.amazon.com/Creature-Jekyll-Island-Federal-Reserv...
• OJFord 4y ago
  The lottery. Honestly it bugs me a bit that I don't know the right way to model it - because so often people will slate it for having a terrible expected return (E[X]), but.. some very high percentage of us here could play every single week without noticing it (negligible downside), and yet winning however slim the chance would be somewhat life changing - even if it wouldn't make you quit work it'd be a nice windfall. I suppose you can just view it as a microcap, very high risk investment. I don't play, fwiw. I do have Premium Bonds, a lotteryish government scheme in the UK where you keep the invested amount and it can't go down (other than in real terms) but has a shot at winning various amounts each month up to the maximum of £1M. That's a lot easier to justify to myself, but I do wonder if it's a bit too easy to dogmatically hate on the lottery.
  • ada1981 4y ago
    The lottery seems like a really dumb thing.
    • 13of40 4y ago
      Compare it to something like voting. There's a vanishingly small chance that your personal vote is going to sway any issue. The benefits of voting are only felt at a societal level rather than a personal one. Lotto also has societal benefits, like funding schools and keeping organized crime out of the casual gambling market. Plus it's fun, on the order of, say, eating a mini bag of Doritos while you're stuck for three hours in a train station (but without the calories). So why does the "I know math" crowd deplore the lottery but not voting? I'm guessing the real answer is that one is looked at as a low-class activity and one a high-class activity. Edit: Just to be clear, my point isn't that voting is bad, it's that lotto isn't a pure math problem.
      • ada1981 4y ago
        The vast majority of lotto cash comes from poor people. It’s a regressive / intelligence tax. The government encouraging poor people to make a poor financial decision is really bad social policy IMO.
      • 4y ago
• purpleblue 4y ago
  > Investing in call options on AMD in 2014 or Tesla in 2019 also had huge asymmetric upside. It was clear that these stocks had massive risks, but while the upside wa potentially s huge, the downside was capped at -100%. This is a terrible example. No one knew that the stocks would skyrocket. So at the time it was asymmetric on the downside because the cost of options were ridiculously expensive.
  • accountofme 4y ago
    No, this is the perfect her care for an option. This gives the buyer and option to buy or sell at an agreed upon price. The buyer of the option pays a premium, and only loses that if they choose to not exercise the option. If they exercise the option they also have to pay the agreed upon price. As such, there is an asymmetric upside in this case.
  • valdagger 4y ago
    The point isn't whether you "knew" the stocks would skyrocket. It's whether they could with some reasonable/acceptable probability. I remember these stocks being in the doldrums in each of those years and thinking that they could explode with a little execution. I was thinking of buying the stock (but didn't). If I was thinking along the lines of the call option (adding more asymmetry), I might have pulled the trigger. This isn't a "hindsight is 20-20" example.
  • redox99 4y ago
    I don't know where he gets the 2014 AMD thing from, but investing in AMD in 2016/2017 was the easiest money I've ever made. I think there is a massive information asymmetry[1] in this space. If you could interpret both the leaks and the news related to AMD Zen, and Intel process being mega fucked, it was an investment with the odds highly in your favor. So basically invest in things where there is a big information asymmetry. [1] https://en.wikipedia.org/wiki/Information_asymmetry https://en.wikipedia.org/wiki/Information_asymmetry
    • thunky 4y ago
      It's really that easy? Care to share another stock pick today with asymmetric upside?
• xyzzy4747 4y ago
  Investing in Bitcoin in 2011 after learning about it on Hacker News.
• dionidium 4y ago
  Buying a house in the United States. For as little as 5% down, and low-single-digit-fixed rates over a 30-year term, you can purchase an asset worth hundreds of thousands of dollars and you get to keep all the upside if its value goes up (which is historically quite likely, especially since housing policy in the U.S. deliberately keeps supply low). It's insane leverage, an excellent inflation hedge, and you get to deduct the interest payments from your taxes, to boot. Oh, and when you do sell, a bunch of that upside (up to $500k) is tax-exempt if it's your primary residence.
  • nerdawson 4y ago
    Where’s the huge upside though? You need a roof over your head so if your property goes up 10%, so has every property you’re likely to want to move to when it comes time to sell. You only really benefit if you’re investing outside of your primary residence. What’s more, the risk is huge. In the AMD example, you could lose 100% of your investment. Get things wrong with a house and you’re going to be out way more than your initial investment. I own a home because it’s the most comfortable option for me and my family. With that said, I view it as a utility and not an investment.
    • dionidium 4y ago
      > You need a roof over your head so if your property goes up 10%, so has every property you’re likely to want to move to when it comes time to sell. I think this common argument massively overstates the case. I have friends whose parents left them their primary residence. Mine did not. "Where’s the huge upside though?" sounds to me like sort of an insane question, when viewed through that lens. But just to lay out the argument further, here are some concrete examples of upside: 1. The money is real and you could move to a lower-cost-of-living area. Owning a house in San Francisco is like having a standing offer of a million dollars to move to the Midwest. That's not nothing. "But I don't want that million dollars, I want to stay here," is not a compelling argument. The offer exists whether you take it or not. 2. You can sell and rent and keep all the equity, which you get to invest elsewhere. Congratulations, you're now a renter, just like millions of ordinary hard-working people. The difference between you and them is the cash you put in your pocket when you sold. 3. Your mortgage payment is fixed, so it's an inflation hedge. 4. You can borrow against your equity. 5. Because you can buy with so little down, having a lot of equity means it's pretty easy to buy again, even if prices go up. An existing homeowner is much better positioned to buy than a non-homeowner, all else equal. The benefits of owning a valuable asset don't disappear just because you don't want to sell it at the moment. The asset represents options, if nothing else.
• insightcheck 4y ago
  This might be simplistic, but the concept of "asymmetric upside" might be captured in any situation where "the worst thing can happen is that the person says no." This includes: applying to competitive positions when you don't seem completely qualified, cold calls in sales (sales seems to be heavily based on asymmetric upside, where sales people call many different people until they get a few Yes-s), and asking people to hang out just to make friends. More related to money, I've thought that cheap (and often free) educational material to have a large potential upside. Good books are often time well-spent, as long as there is enough time spent applying the concepts too. A cheap online course on video editing (I think about $10 USD at the time) has also come in handy many times.
  • tpoacher 4y ago
    Of course, this is only trivially true when "the worst thing that can happen is they'll say no" is true. Typically it's not.
    • egghead500 4y ago
      I've asked a friendly girl who I've known for a while out on a date. She politely declined. After that our friendship was never really the same; there was always something awkward. I regretted asking her out because that ruined an otherwise good friendship.
• idiocrat 4y ago
  Legal insider trading. Prominent example are US Congressmen. Personally investing into specific technologies (e.g. NVIDIA) and then passing legislation to promote those technologies benefits everyone, although asymmetrically.
  • elicash 4y ago
    Insider trading isn't legal. See the STOCK Act, signed into law by President Obama in 2012. I am very aware people will say this is unenforced.
    • junofan 4y ago
      Insider trading is completely legal if registered and reported properly.
• contingencies 4y ago
  Health, education.
• f0e4c2f7 4y ago
  Learning programming.
  • insightcheck 4y ago
    This is a good example, but I've found that this benefit is actually non-obvious to people in the beginner stages of learning. A popular view before starting to learn is that everyone should "learn to code" because programming jobs are in-demand and pay well (at the pre-beginner stage). Then, when many learners actually start to learn, it can take months to write a genuinely useful program. All the way, you might learn how to do arithmetic in Python and write loops, without a seemingly practical purpose (just seemingly-contrived exercises). I admit that this actually put me off programming for a while, because I couldn't see the upside. Eventually, a web scraper became helpful for a project, along with a better understanding of programming for tweaking a website. Then I went back to studying, and it helped me greatly to have very specific goals. So, while "learning programming" is correct, I think it will help people stick with it, if specific outcomes are emphasizes (e.g. "learn automation through programming" or "learn website application development through programming").
• quickthrower2 4y ago
  Starting a side hustle business? For "$10k" work of effort it could lead to many times that in revenue in the future.
  • threeseed 4y ago
    I would add to this, a side hustle business where you learn something new. Even if the business fails that knowledge will often be invaluable in future jobs, projects etc. Plus it can really help with feeling unmotivated and stuck in life.
    • quickthrower2 4y ago
      Yes I like this approach. One must be careful that the learning something new doesn't become the priority. For example are you trying to learn a new programming language (that you don't need for it), or make money. Trying to do both a once is a sacrifice for both.
    • insightcheck 4y ago
      > "Plus it can really help with feeling unmotivated and stuck in life." This is a great perspective. Having a strong side interest gave me a lot of happiness in times where I was set up for a lot of difficult, repetitive work over a significant stretch of time.
• sneak 4y ago
  Asymmetric upside is only really useful if the EV is positive. Bets "on the inside" in roulette have asymmetric upside, they pay out 35:1. The problem is that the chance of winning is 37:1 on an American wheel. This means that the EV is negative: do it enough times and you will lose money. You should constrain your search to positive EV gambles.
  • kman82 4y ago
    Excellent and important point
• deleted 4y ago
  [deleted]
• dustractor 4y ago
  Buy crypto while I'm awake, sell about ten minutes before I wake up.
• mariojv 4y ago
  Asking for a raise or a promotion. The squeaky wheel gets the grease. There may be toxic environments where there is a large downside - losing your job - but I hope that is not the case for most who are reading this comment.
• mbg721 4y ago
  Options in general have asymmetry built in; that's the point of using them for risk-management. The idea is that the buyer pays a flat amount for the privilege of limiting the downside risk, and the seller is expected to know what they're doing and rake in that flat fee in exchange for being able to handle the rare-but-severe unlimited downside.
• tjmc 4y ago
  Good insurance. Paying a fair amount of money to hedge against rare but potentially ruinous events - like your house burning down - is obviously a good strategy. The trick with insurance is finding the sweet spot between paying too much for cover you don't need or too little and being exposed to gaps in your cover. Lately I've been increasing all my excess values to bring down premiums, because I can afford to pay a high excess and it's unlikely I'll need to.
• httpz 4y ago
  Running a casino
• nl 4y ago
  > Investing in call options on AMD in 2014 or Tesla in 2019 also had huge asymmetric upside. It was clear that these stocks had massive risks, but while the upside was potentially huge, the downside was capped at -100%. This is unactionable advice. Call options on any stock are capped at -100%. It's choosing which ones are worth that risk that is the hard part.
  • valdagger 4y ago
    This isn't advice. Not is it intended to be actionable.
• _e4mv 4y ago
  Asymmetric downside - sharing ideas that you could potentially personally benefit from just because somebody gave you some inspirational hippie BS wisdom like “we’re all working for the progression of humanity”. Wake the f up, welcome to capitalism, the snakes just took you for all the creative brain power you had.
  • deleted 4y ago
    [deleted]
• WheelsAtLarge 4y ago
  College education is/was one. Hard to tell these days with the high debt that comes with it for many but it can mean a complete change of lifestyle for the individual and his/her family. I like to think it still is.
• mikewarot 4y ago
  Develop a technology that helps people convey complex ideas using narrative trails and other techniques on top of massive local storage, as portrayed by V Bush in "As We May Think" in 1945. It still hasn't been done yet, despite the problem of efficiently conveying complex information as being one of the most important challenges facing mankind (more than 75 years ago!) If you can help people convey complex ideas, with all the context and nuance, you've created a new level of expressivity and productivity that could help us all in ways we can't even currently imagine.
• vivegi 4y ago
  Just expanding on the call options, one can even take a neutral hedge position by buying PUTs and CALLs at the same strike price. So, in essence you are betting that the price won't stay at the same level and would either rise or fall. Your net option premium is higher (approx. 2x of just buying a CALL opt or PUT opt only) but your long-term risk is much lesser (considering a sequence of bets) as scrips tend to be on an uptrend or downtrend in a given window and much less frequently get stuck in a range bound behavior. Moreover when the assymetric event occurs (i.e., a meteoric rise or an abysymal crash), the loss is limited to the premium paid whereas the upside is huge. Combine that with the Kelly Criterion (discussed widely here: https://hn.algolia.com/?q=Kelly+Criterion https://hn.algolia.com/?q=Kelly+Criterion) you have a strategy.
• eternalban 4y ago
  - sleep early, wake early, nap at noon. You're still sleeping the same amount of hours but somehow, are more productive and feel better. When I keep to a 10 pm, 5 am routine, I'm in tip top shape mentally. - 1 hour early morning walk. Just magic. - cook and make your own food. Cheaper, healthier, and therapeutic to boot. Also a venue to making new friends, as food brings people together. - a non-activity: get rid of the permanently attached smart device. Bet here is hours spent on a device are far less productive/helpful than equivalent without one.
• novantadue 4y ago
  Moving. All the famous actors moved to New York or LA at some point. Elon Musk moved out of South Africa, Silicon Valley, etc.
• freemint 4y ago
  I wish there was a financial instrumented which is regulated and allows to bet on a stock decreasing while the potential loss is limited. Binary options providers are often scams.
  • scrivna 4y ago
    Buy/Sell an options spread? Risk is capped at the size of the spread x your stake. Theta decay is offset somewhat.
• cupachabra 4y ago
  Networking, you never know who you might meet and how useful they might be in the future. PG said in an YC talk "put yourself in the position to get lucky". Networking is one of those ways.