Chapter 19 The Logic of Risk-taking

1. What is ergodicity?

2. Why is it said that without risk-taking, nothing will be accomplished? Why Don’t ignore the asymmetry of decision-making?

3. What is the most impressive sentence?

What is ergodicity?

If there is a random process, its past historical probabilities cannot be applied to future scenarios, then this random process does not have ergodicity.

Ergodicity, roughly speaking, means that in some cases many very long sample paths will end up looking similar to each other. And the properties of a very, very long sample path are similar to the Monte Carlo properties of the average of many shorter paths.

Why is it said that without risk taking, nothing will be achieved? Why not ignore the asymmetry of decision-making?

If you do not participate in "risk taking", you will not be able to achieve anything. If you deeply reflect on your own thinking and decision-making, you will not be able to optimize and improve your own thinking and decision-making, let alone learn from the experience and avoid encountering extremism again in your next thinking and decision-making.

For example, my investment failed in 2016, and I returned to before liberation overnight and lived the life of a middle-to-lower poor peasant. My family and I really suffered the loss of real money. I am truly involved in "risk taking". I need to spend the next three or four years paying for my wrong decisions and bearing the consequences of poverty. At that time, I would think about it every day, why did I play a good hand of cards to pieces? Why do I know nothing about investing even though I am highly educated? So, from the end of 2016, I began to abandon my original life, purchased a large number of investment books, learned financial management knowledge, eliminated blind spots in financial management, and started reading, writing and managing money. Later, I joined the fixed investment practice group, walked into another mirror world, and evolved into another species.

What is the most impressive sentence?

1. If you want to invest, you must first be alive.

2. If the average depth of a river is 4 feet, never cross it.

3. I try to remain "awe" of the consequences of risky events in my life, because a liquidation will not only make people lose all their previous efforts, but also make people permanently out of the game.

4. Gathering a group of people who have no real knowledge and insights will not produce real insights no matter how large the number of people are.

5. Continuous and repeated exposure to risks, no matter how small the probability of the risk, will eventually lead to death.

6. The number of times of continuous exposure to "low probability" risks accumulates. Even if the probability of liquidation risk is as small as one thousandth, then in the continuous and repeated process, the probability of liquidation will eventually increase. Getting closer and closer to 100%.

7. Unless you are narcissistic or mentally ill, and even then, the worst thing that could happen to you would not be to lose your life.

8. Small harm may be beneficial, and we can regard it as fluctuations, but large harm, especially irreversible harm, is a risk that we must always guard against.

9. If a strategy may trigger the risk of liquidation, then no matter how large the gain is, it will not be worth the loss.

10. Rationality is the avoidance of systematic destruction.