Dabbling in the New Tech: How And Why People End Up Rekt
Level 1: ...And that's okay
Today, we invite you to join us in a journey to the future as we peer through the lens of our trusty crystal ball. In this glimpse of what lies ahead, we see:
“Seven tokens will launch today, each holding the potential to multiply your investments by a staggering 100 times.”
Now, what would you do in the face of such an extraordinary opportunity?
The allure of such opportunities is undeniable, and the crypto realm's upside is nothing short of immense. However, the path to crypto success is riddled with pitfalls, and the fear of getting 'REKT' still looms large.
We invite you to venture with us into a realm where crypto dreams become reality while safeguarding your hard-earned investments. Together, we'll explore five crucial factors in your life that, when addressed, can significantly enhance your journey through the Cryptoverse.
Underpinnings of Crypto Success: Navigating the Challenges
Inline with “Bumpers”1 it's crucial to identify and hedge against the roadblocks that might be present to our success. Here are five “Bumpers” for tinkering in crypto, AI or any new tech.
Intractable Problems (problems that cannot be solved)
FOMO & Urgency
Micro-strategy Diametrically Opposed To Macro Belief (Violating Own Economic & Personal Principles)
Frequency of Exposure
Asymmetric Risk (To The Wrong Side)
When you have the explosive upside inherent in new and exciting tech, you don’t need everything to go right. The key is to not blow yourself up in the process and let time pass and randomness be… random.
The Intractable Problems: Defining A Strategy
When it comes to crafting a winning strategy in the world of crypto, your favorite influencers may offer solutions promising the elusive 100x moonshot. However, let's explore an answer that may not be as widely embraced but holds undeniable truth.
Are you ready?
The truth is, there's no one-size-fits-all strategy in crypto. Your approach depends on your unique circumstances. Are you aiming to pay off your wedding expenses in just 1.5 years? Or perhaps, your goal is to clear your house mortgage over the span of 30 years? These distinct objectives demand vastly different approaches.
The intractable problem that most crypto enthusiasts face is simply, "How do I get more?"
This problem is intractable, because there is no solution. Without a clearly defined end goal and timeline, “more” becomes a hamster wheel. It’s unclear when to take more risk, when to take risk off the table and how much risk is necessary at any given point in time.
Now, let’s contrast “more” with a defined problem:
How do i get an extra 85k in 17 months? So that I can pay down my student loans.
By framing the challenge this way, we introduce defined variables and set the stage for a reverse engineering approach to find solutions. Given the total needed and the timeline we can start to discern how to allocate the resources we have available to us and, perhaps more importantly, when to walk away from the table.
FOMO and Urgency: Navigating the Crypto Landscape
Despite Bitcoin's launch in 2009, the crypto realm is still in its infancy, offering enormous potential. It's not uncommon to experience the fear of missing out (FOMO) and an urge to act swiftly.
Have you ever missed out on a presale launch?
Still bummed you missed Bitcoin at a dollar?
Don't fret; there will be 15 more coin launches today and 100 more throughout the week. The “new and exciting tech” landscape is filled with daily opportunities.
By transforming your intractable problem into a solvable one, you gain the ability to distinguish between what truly matters and what doesn't. This shift can help you curb FOMO-driven impulsive decisions.
Remember, restraint is key. As long as you remain in the playing field, you have a chance to succeed. It's crucial to avoid knocking yourself out through emotional decisions (this includes euphoric and fearful decisions) driven by FOMO.
Micro-strategy Versus Macro-strategy
One common pitfall is deploying a micro-strategy that is diametrically opposed to your macro-strategy. Many crypto traders, for example, fall into this trap. In an attempt to acquire more Bitcoin, they sell bitcoin, trying to time the market. In reality, the majority of investors would have been better off adopting a strategy of dollar-cost averaging and simply holding their assets.
For instance, consider the case of a Bitcoin believer. Selling Bitcoin in an attempt to gain more is a micro-strategy that directly contradicts their macro belief in the long-term potential of Bitcoin.
Doing thing in the short term that get you further away from what you want in the hopes that it gets you what you want faster is tempting; but rarely works out well.
Balancing Time: A Real-Life Example of Micro vs Macro
Think about a common scenario in life:
"I wish I had more time so I could spend it with my kids."
Ironically, every time you gain more free time, you often fill it with more work, hoping that this additional effort will somehow create more opportunities to be with your children later. This cycle can perpetuate… in an attempt to spend more time with your kids, you have deployed a strategy that ensures you spend far less time with your kids.
Obviously, the key to not violating your macro-strategy is to be clear on what you macro-strategy is. That’s another topic for another time.
Frequency Of Exposure: Managing Emotions In Crypto
In the realm of anything exciting, like crypto or stocks, one often-overlooked but critical factor is the frequency of exposure. This aspect can play a substantial role in an investor's journey, impacting both emotional well-being and financial decisions.
Frequency of Exposure is a TGA Fundamental concept worth revisiting many times here:
The Problem Of Asymmetric Risk (To The Wrong Side)
In the dynamic world of new tech, one of the most critical considerations is asymmetric risk—specifically, the potential for an investment to yield extraordinary gains versus the risk of significant loss.
In crypto, many individuals are drawn to bets that promise astronomical returns, often reaching up to 100 times their initial investment. However, this allure comes with a substantial downside—investments can plummet to zero, leaving investors with nothing. The mathematical equation paints a stark picture: Upside potential equals 100x, while the downside is seemingly infinite.
This imbalance between potential gains and potential losses highlights a glaring problem in crypto investing. We must strive for a scenario where the downside risk is significantly smaller than the potential upside.
Let’s Play A Game: Balancing Risk and Reward in Crypto
Imagine you're presented with a tempting bet: Pay $10 to enter, with the chance to win a $10,000 prize, and an 83% probability of winning. At first glance, basic math and probability make it seem like a no-brainer—an opportunity too good to pass up.
It’s Russian Roulette.
Suddenly, the choice becomes crystal clear—a rational person would not take that bet.** This example highlights a crucial point: When we're driven by the pursuit of upside potential, we often overlook the potential for complete ruin.
In the world of crypto investing, it's imperative to remember that when the risk includes the possibility of total loss, the asymmetry is never in favor of the upside potential. No amount of potential gain can justify risking what matters most, especially when the stakes involve your financial well-being and personal security.
Life, like crypto investments, involves wins and losses. However, pursuing an asymmetric risk to the upside is only wise when complete ruin is not a realistic outcome. It's essential to set limits and avoid spending more than you can afford to lose.
**The reason Russian Roulette is often not worth it is because the risk is complete ruin; death. If the bullets were replaced with blanks and the only risk was losing a small amount of money, it would change the game, entirely. All this to say: the way to keep asymmetry to the upside is to make bets that are small enough that it won’t kill you (knock you out of the game) if you’re wrong.
We all have moments where we make mistakes.
Still, being aware of these cognitive biases can empower you to establish systems and strategies that mitigate their impact. By doing so, you can navigate the world of crypto with a clearer perspective, reduced emotional bias, and a higher likelihood of making sound investment decisions that align with your long-term goals and values.
We will be diving deeper into risk, asymmetry and turning intractable problems into problems that can be solved and, therefore, inform behavior. Stay tuned.
The TGA team has been packaging up courses, recordings and masterclasses for ambassadors, paid subscribers and Guardians. It’s not really a Christmas Bonus, they will be released throughout the next few months, but it’s Christmas so it sounded like an appropriate title.
Live to Learn. Give to Earn.
Ps. We’re excited to see a little competition brewing on the leaderboard.We’re going to have to step up the rewards.