Asymmetry

The key to investing in things over which you have no control, is understanding the asymmetry. Not getting obsessed with precision in predicting things that are unpredictable. Trying to understand the key drivers and the fat tails. What would make the investment go to Zero? What would make the investment double? Is the business built to last over time, and through the bumps and dips? Is the problem the business solves of genuine value? Does the business have a track record of open-minded, honest, and meaningful, listening and learning? If the upsides outweigh the downsides, then with some diversification, it is worth investing. Investors in funds are a degree removed. Their Capital is at risk. Managers attempt to align interests, but it is not completely possible because risk is holistic. It isn’t just the income (return) line that matters. A Managers track record can be wiped out. They would have been drawing fees over the long term for that, but the facts will show zero value added. Spin how you like, but that is the asymmetry for the manager. Fees get paid. Value added is always at existential risk. Some part of what you are building needs to be built to last. Even if the manager “Co-Invests”, they will have other assets that are built up. Asymmetrically.