The Difficulty of Investing

Going from 1 to 5, how much do you need? You need five times.

But going from 5 back to 1, losing it all, only requires an 80% drop.

What if you're fully invested with 5x leverage? Then a 20% drop wipes you out—overnight, you're back to zero, back to nothing.

There's a saying in Journey to the West: one day in heaven equals one year on earth. If everything in your world happens at a particularly fast pace, then relative to the former, you effectively live much longer.

The problem with going heavy is there's no hedging.

What we call "reading the market right" simply means a high-probability event occurred. But where there's a high probability, there's also its opposite—a low probability. If the low-probability event happens, can you withstand it? Have you even calculated for it? Not only have you not calculated it, you haven't even designed a hedging model for it. Once you can't hold, there's no after—that's the end. Understand?

A businessperson isn't really afraid of losing money. There are wins and losses; profit and loss come from the same source. As long as the business continues, you can win back what you lost.

What does a businessperson fear most? A broken capital chain. In that one instant, the buffer meant to absorb mistakes empties out and collapses.