The Magic of Maxims-Part 4

in #life7 years ago (edited)

Maxim 5 is the corollary to Maxim 1 (which was “never risk a lot for a little”):

5- Seize opportunities to risk a little for a lot—opportunities where the gain if you are right far exceeds the loss if you are wrong.

If we are observant, we’ll find that life every-so-often presents us with low-risk, high-reward opportunities. If we’ve followed Maxim 1 religiously in the meantime, we’ll be well-positioned to take advantage of them when they arise. But to do so, we have to first recognize them.

Recognizing low-risk, high-return opportunities is not easy because, almost invariably, we’ll be going against the grain of accepted wisdom. Here’s why:

Scientists have proven that humans are not rational actors, though they fancy themselves otherwise. Because they are both irrational and in denial about it, their decisions are usually anchored in all types of cognitive biases. These biases lead to unsustainable extremes in behavior. If you can spot these extremes, you’ll also spot opportunities to bet on their eventually demise.

For instance, one of our most deeply imbedded biases is the herding instinct. When humans are forced to make quick decisions in the absence of complete information, they instinctually follow the crowd. Consciously, we assume that the crowd must know something that we don’t (but it usually doesn’t). Unconsciously, we believe that we are less likely to succumb to an unknown threat if we are hunkered down in the middle of a pack.

This innate herding instinct is the source of most all trends and counter trends, booms and busts, fads and counterfads.

So, one way to spot exploitable, low-risk opportunities is simply to look for extremes in human sentiment, especially the sentiment of the establishment elites. When most all members of the establishment are all lined up on one side of an issue, which happens about once a decade or so, that’s an opportunity to place small bets on the opposite outcome. For instance, given the extreme sentiment favoring Hillary, betting that Trump would win the Presidency was a low-risk, high-reward proposition.

However, recognize that when we’re going against an extreme establishment tide, small bets are all that’s needed. Anything more than a small bet risks catastrophe and may violate Maxim 1. If we’re right, the payoff on a small bet will still be enormous. But if we’re wrong, the loss will be inconsequential.

It’s important to recognize that the establishment will in fact be right more than it is wrong, which means that we’ll lose our small bets far more often than we win them. But...that’s okay. When we’re right, we’ll be very, very right. And when we’re wrong, we’ll only be a little wrong.

On a society-wide level, extremes of sentiment usually manifest as easily identifiable panics and manias. Those are always good times to make small bets that go against the grain (though doing so takes a ton of intestinal fortitude). But Maxim 5 is effective even on much smaller scales. Whether we’re tasked with raising our children, hiring new employees, buying a house, making new friends or...most anything, we must seize most every high-reward, low-risk opportunity to go against the grain.

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Well, it would seem that anyone here now at this stage in the CrYpTo game on this platform is going against the grain as the percentage of people especially here in the US are not on board. The numbers are growing with each and everyday pointing out the upcoming herd mentality movement. It is harder for most, who would rather watch the game than do a little studying for themselves, to take the advice of someone else or follow a trend but it's more often than not to their own demise. I think being active in one's awareness is a key success factor in this game we call life. Nice post. I've enjoyed this series very much.

A man is rational when he recognizes himself and admits his mistakes, that making him a mature person as well.
The wise did not become wise only by chance they made mistakes and learned a lot from their mistakes, which give them a large amount of information and wisdom
In my opinion, the opportunities that are difficult and dangerous is what win. the stock market as an example, if you don't take a risk, you wouldn't win.
There is a wisdom in the marketing world that says "the right time brings you the right customer"Time and adventure are key factors in the business world.
btw i posted yesterday a post about some tips can make you a better one feel free to take a look. Greetings

Yea sure this is a wake up call for me. I have always never known when exactly to take certain risks and probably that is why I loose most times but with you posts I think I now know when exactly to take those kinda risks...Thanks man

As they say, look for the things that are needed and few exist
Originally a human animal by nature , Although he has a mind but does not use it, Just follow the crowd As one of the sheep
Thank you for this valuable topic @sean-king

Wow! Such wonderful words of wisdom from you @sean-king.

For instance, one of our most deeply imbedded biases is the herding instinct. When humans are forced to make quick decisions in the absence of complete information, they instinctually follow the crowd. Consciously, we assume that the crowd must know something that we don’t (but it usually doesn’t). Unconsciously, we believe that we are less likely to succumb to an unknown threat if we are hunkered down in the middle of a pack.

That paragraph in particular caught my attention because it is even prominent here on steemit. Many do not have a sense of direction but gamble with the ideas of others. It is however understandable when people try to get traction for their contents but it seems not to be forthcoming.

This is a huge exposition. Thank you so much. Though not your usual photography posts, it is full of impact.

Thanks my friend for this wonderful subject that I have seen
If you want to evaluate the opportunity correctly, you have to compare it with your real results. Not with your possible results. Compare them to your current status. Ask yourself: "Is this opportunity a step towards the goal?" If yes, it is worth trying. Deserves to seriously seek to seize it. Why? Because you will approach her from your goal. It may be a small step, but you will soon be closer.
Is not it easy to expect the next chance to be better, bigger and bigger? This is also a healthy indicator.
Small opportunities are often low risk. Meaning you will not lose much if the result is bad. You will have learned that this path will not lead you to what you want. Without significant risk. This is something you can not find in large opportunities, where risk is often - if things go wrong - large, and losses can be huge.

discuss about politics, in got a desire we have to sacrifice a lot, a variety of ways to occupy power!!
When this power is number 1 and will replace the truth become wrong.
a little attempt to will a lot of sacrifice.
Thanks @sean-king for interest topic

wonderful articl is worth reading
If you want to evaluate the opportunity correctly and rationally compare it with your real results. Not with your potential results. Compare them with your current condition.
Ask yourself: "Is this opportunity a step towards the goal?" If the answer is yes,
They deserve to try
And replace the effort to reach them
Because the chance of success will be greater

My friend I am very close to the reputation 47
If you can encourage me
I will not forget your favour
Happy day

you are always the best @sean-king

A very nice post @sean-king, the words you write have a very profound meaning to me. That's what life says, sometimes it does not happen the way we want it to be. But it is a fate, we can not change destiny, because we can only change our lives for the better. With effort, hard work and keep the spirit despite having many challenges.

As long as we are alive, problems always come, whether they are big or small. But all of that we must be ready to face it. Because of all that there will be a way out. In essence, to have something that we want and for us to be successful, it takes hard work and has many challenges. Thank you so much @sean-king for sharing this very helpful words, and hope you have a wonderful day .... :)