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Asymmetric Returns - How to Get Them

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thechosen1

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This article has great examples of asymmetric returns that ANYONE can take advantage of.

Reading this changed my thinking:
 

Antifragile

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@thechosen1 that’s a great read. I’m a big fan of searching for asymmetry.

That’s what I took away from MJs latest book as the central theme. I’m just going to quote myself here haha!


What did I take away?
  1. The asymmetry of the rewards. It seems the book kept coming back to the same concept that investing in yourself, your own business, while risky, is positively skewed to having a massive return on that investment. It's asymmetric in a good way. Plenty of examples of asymmetry in a bad way too, like doing something stupid while drunk that could cost you a marriage, or life etc. I just loved this part, if there was one thing to take away it has to be this (for me). It seems most other topics circle around this one key concept.
  2. The easier it to start a business, the harder it will be later. And the reverse is true! While it is an example of the above mentioned asymmetry, I found it to be the most potent example. The reason is because it goes to show one thing, comfortable isn't likely to be very profitable. It is not only OK to be struggling with starting a business, it is a good thing if you are! I am happy to share that I speak from experience, as our business had massive barriers to entry and is doing very well.
Conclusion: just f**ing loved it.
 

thechosen1

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@thechosen1 that’s a great read. I’m a big fan of searching for asymmetry.

That’s what I took away from MJs latest book as the central theme. I’m just going to quote myself here haha!
Quote away, that is a great quote of yourself and good summation of this point in MJ's book(s).

I think the biggest gap between those who "get" this and those who don't is simple confidence.

You have to be willing to bet on yourself.

Betting on yourself is like cheating in poker! Because if you don't have a good hand, you can work super hard to get a better one!
 

MJ DeMarco

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Yes, Asymmetry is a huge topic in TGRRE .

How culture wants you to play the game: Call 2 coin flips in a row and you get to retire at 65 with a million bucks, while continuing to live the same frugal existence that got you there.

How Fastlane wants you to play: Call 2 coin flips in a row you can earn millions in a few short years, and live the rest of your life anyway you want.
 

MJ DeMarco

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Another critical item for asymmetrical returns is the ability for repeat customer use.

One and done products (like a book, duh) are harder to scale than something that builds naturally through repeat use. @AllenCrawley sells cologne and men's personal products -- his customer list has a natural expansion bias, making asymmetric returns more likely than someone who sells "one and done" stuff.
 

thechosen1

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Another critical item for asymmetrical returns is the ability for repeat customer use.

One and done products (like a book, duh) are harder to scale than something that builds naturally through repeat use. @AllenCrawley sells cologne and men's personal products -- his customer list has a natural expansion bias, making asymmetric returns more likely than someone who sells "one and done" stuff.
Makes perfect sense, which is why I always like rentals, disposable products, etc.

Software with a subscription fits the bill, but even one-and-done software is nice since you only build it once! (with support, of course)

I can't help but feel constrained by working super hard for every project only to need to hustle up the next one, even in a high-magnitude business.
 

ArHS

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This is very similar to Taleb's work in Black Swan and other books. In math speak, most slowlaners have fairly thin normal distributions in terms of probability of how much money they will earn on a month by month basis, whereas fastlaners will have much fatter tails - although the thing that bugs me more than anything is that someone who fails at creating successful business systems can always fall back to the standard 9-5 bullshit to try again, so it is like you add the possibility of becoming very rich (because you are attempting to deliver value to consumers) and thus adding a chunk of probability in the positive tail of your possible wealth distribution. I think this is one of the most powerful concepts that MJ brings forward - you could try to deliver value and fail in 1,000 different ways and you would still pretty much be in the same position that someone preaching the slow lane is.
 

DavidL41

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Another critical item for asymmetrical returns is the ability for repeat customer use.

One and done products (like a book, duh) are harder to scale than something that builds naturally through repeat use. @AllenCrawley sells cologne and men's personal products -- his customer list has a natural expansion bias, making asymmetric returns more likely than someone who sells "one and done" stuff.
I've noticed that with Zappos(R.I.P Tony Hsieh ) that the experience of Zappos is so fun, effortless, and often better than in store shopping that customers kept wanting to browse, tell others in conversation about the company, and eventually buy even if it cost a slight bit more. The same thing happens with Ikea. The value proposition (experience, customer service, and products) is beyond their expectation so they feel it's way worth to buy there than elsewhere.

Is a top approach to continually optimize the value proposition to be compelling, and high value? At the end of the day the people that can create the most tailored, and best value proposition to their audience is at a huge advantage?
 
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bmyers

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This article has great examples of asymmetric returns that ANYONE can take advantage of.

Reading this changed my thinking:
Thanks for sharing!!! Excellent article. I love huge upside with limited downside. Lots of mega rich folks have mastered looking at life this way.
Cheers.
 

DavidL41

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This is very similar to Taleb's work in Black Swan and other books. In math speak, most slowlaners have fairly thin normal distributions in terms of probability of how much money they will earn on a month by month basis, whereas fastlaners will have much fatter tails - although the thing that bugs me more than anything is that someone who fails at creating successful business systems can always fall back to the standard 9-5 bullshit to try again, so it is like you add the possibility of becoming very rich (because you are attempting to deliver value to consumers) and thus adding a chunk of probability in the positive tail of your possible wealth distribution. I think this is one of the most powerful concepts that MJ brings forward - you could try to deliver value and fail in 1,000 different ways and you would still pretty much be in the same position that someone preaching the slow lane is.
I believe that it's almost like a person that truly dedicates themselves to something(weightlifting, a craft) will be almost guaranteed to get to a high level over time (90th to 99th percentile). The average person sits at 60th to 70th percentile, and some more interested sit a bit higher. The ones devoted get to a higher level. If they are exceptional they can get to 99.99 percentile. Likely not the top of the top: 1 out of 100,000 or higher. However, to excel in a very non-competitive market scenario that has way too little supply, and a lot of demand you can succeed even if you are mediocre, or average (50th percentile to 70th percentile) where in normal or tough scenarios these people typically drown. Even better if you are currently at a high level, or very high level.

Imo, I think if you chose a promising opportunity that is favourable to your current ability you can bootstrap those opportunities over and over to get into the money. You decide to cut off the business or go 50/50 with someone(and let them control the business) if in 2 years you are not hitting your milestone. Then you bootstrap a different opportunity that you try to get off the ground. If one gets off the ground and gets to heavy profitable cash flow you can eventually put profits into a different venture, or real estate. In the end all it takes is to find one favourable scenario for yourself (that you persistently improve) to pay off and with luck, exponentially grow to cash flow and beyond. So, being capable, being a good performer and having critical thinking/strategy(accuracy) is the key imo.
 
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Manfern

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Yes, Asymmetry is a huge topic in TGRRE .

How culture wants you to play the game: Call 2 coin flips in a row and you get to retire at 65 with a million bucks, while continuing to live the same frugal existence that got you there.

How Fastlane wants you to play: Call 2 coin flips in a row you can earn millions in a few short years, and live the rest of your life anyway you want.
I assume you meant big ROI in the book, it can be linked to Paretto principle too.
20% effort gets 80% return, work smart etc

Culture taught us to get profession and idea based on fixed income formula, and to be honest most people are too selfish to build something valuable for others.

After reading GRRE found a book - Start From Zero by Maxwell Dane, it's a good addition and very on point, for those who still have doubts.
 

DavidL41

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Jul 30, 2021
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I assume you meant big ROI in the book, it can be linked to Paretto principle too.
20% effort gets 80% return, work smart etc

Culture taught us to get profession and idea based on fixed income formula, and to be honest most people are too selfish to build something valuable for others.

After reading GRRE found a book - Start From Zero by Maxwell Dane, it's a good addition and very on point, for those who still have doubts.
As a heads up I am a different person than you quoted, obviously.

Pareto principle is a way to say there are some things more effective than others. The Japanese have their kaizen and so on where they keep shedding away waste and inefficiencies, and only allocate their resources and efforts into things that are valuable/effective to the end result. Imo, the Japanese have it wrong because you can add more value/be more effective than you can reduce inefficiency.

--------

I believe the Matthew's principle is more fitting. The more effective performers in the marketplace win in a very asymmetric way. Some markets are so competitive that people can't break in unless they see stagnation, and innovate their value proposition far above. Tesla was the only one to do this in the car industry for a while.

Another way of saying it is the people that are the top 1%, 10%, 20% or top 40%(depends on the market) businesses for instance continues to exponentially improve year over year all of the following: value proposition, profit and growth at an accelerated pace(based on how highly ranked they are) over the average competition.

The name of the game imo is to optimize your value proposition till you are a top competitor in the fast lane(where you recieve all the spoils/snowball forward), rather than the slow lane or the dead end. If you can't reach it, or you can't reach it fast enough you will not receive the asymmetric growth. The strategy is usually find somewhere in the market you can initially compete and continually innovation/optimization to shove yourself up there into the fast lane, or entering in a new market and taking the early lead.
 
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