This is quite interesting and reminds me of a short option position as a previous hedge fund manager—you earn time decay or option premium when things are going well or stable, and then once in a while you take a big hit (and a lot of of people/orgs do not survive the hit). This is not a strategy I follow from a risk adjusted return point of view on a longer term perspective. I would not like to be short put option but rather be long call option and try to minimise my time decay or option premium. The latter is more work and time consuming but I have managed to construct very large option structured positions with almost no time decay as a hedge fund manager. In EA terms some of the ways I would like to structure long call options on EA whilst minimising risks would be look for strong founders and team, neglected with large convex upside, tractable and cost effective even with base case delivery (GWWC, Founders Pledge and Longview were good examples of this), and continue to fund promising ones until other funders come in.
As a general observation I think EA overemphasise expected return and not enough on risk adjusted return, especially when in some cases some sensible risk management can reduce risk a lot without reducing expected return much. (eg ensuring we have experienced operational, legal, regulatory and risk management expertises). This may have something to do with our very long impact time horizons and EAs preference to work things out from base.
I also like to emphasise that it does not always have to be bad actors, but could also be people acting outside their level of expertise and/or competence in good faith. And trust perhaps like market cycles can be oversupplied at times and in certain areas and under supplied at other times and areas.
This is quite interesting and reminds me of a short option position as a previous hedge fund manager—you earn time decay or option premium when things are going well or stable, and then once in a while you take a big hit (and a lot of of people/orgs do not survive the hit). This is not a strategy I follow from a risk adjusted return point of view on a longer term perspective. I would not like to be short put option but rather be long call option and try to minimise my time decay or option premium. The latter is more work and time consuming but I have managed to construct very large option structured positions with almost no time decay as a hedge fund manager. In EA terms some of the ways I would like to structure long call options on EA whilst minimising risks would be look for strong founders and team, neglected with large convex upside, tractable and cost effective even with base case delivery (GWWC, Founders Pledge and Longview were good examples of this), and continue to fund promising ones until other funders come in.
As a general observation I think EA overemphasise expected return and not enough on risk adjusted return, especially when in some cases some sensible risk management can reduce risk a lot without reducing expected return much. (eg ensuring we have experienced operational, legal, regulatory and risk management expertises). This may have something to do with our very long impact time horizons and EAs preference to work things out from base.
I also like to emphasise that it does not always have to be bad actors, but could also be people acting outside their level of expertise and/or competence in good faith. And trust perhaps like market cycles can be oversupplied at times and in certain areas and under supplied at other times and areas.