I have put $26k in a venture and lost it all, put $16k, and got >30x.

I don't tell people where and how to invest their money because I am still learning how to invest mine.

Risk and reward are strange bedfellows. There is no permanent calibration of expectations.

This year, I was very risk-averse generally but also risk-on in some areas. I looked at what I could afford to lose and invested it. What I could not afford to lose, I hedged it.

The hedge is the most important part of risk management. I never look at ”what if?” with my hedge.

The worst-case scenario is equally as probable as the best-case scenario. I have lost $150k in a year because I only considered the best-case scenario after I got it from a fluke transaction. I lost it to a black swan event the same year.

I have a very wealthy friend. He doesn't do hedging. He goes all-in with conviction whenever he is sure. He is, however, not a gambler as he takes very calculated risks in areas where he has domain knowledge. His passion is to always find new areas to have domain knowledge.

I realized one day that it is the thing that startup investors also do. You take a journey with someone who has conviction only because you are also sure about that domain and have some unique knowledge. Someone taught me a good lesson about AI investing I never forgot.

He said that he doesn't invest in algorithms as they are easily replicated. He only invests in composite models that have data and domain knowledge. He broke down his thesis in the simplest way in 10 minutes. That came from deep domain knowledge as well.

I ask people who want to invest to do the same. From stock market investment to venture. If you can't articulate why you are doing a particular investment in less than 10 minutes, please don't do it. If you have any doubt at all about returns. Study further or leave it.

FOMO is the worst possible reason to do an investment unless it is money you can afford to lose. Apparently, there are a lot of people around with money to lose. The problem is that they don't know that they can't afford it yet until they are hit by multiple black swan events.

The year I lost $150k, 10 different transactions collapsed. The possibility of that happening can probably seem to be attributed to the supernatural. The truth was that I was stretched and not paying attention to each one. I don't make the mistake any more.

Even if I invest $1k, I monitor the industry. I cut losses and move on quickly as well. I was explaining to a founder why tranched deployments of capital made a lot more sense. It forces you to be capital efficient. It is not that the investor is wicked. It makes you disciplined.

No matter how much conviction you have, still, watch out for signs. I was convinced about buying an Airbnb property January but never saw the pandemic coming. My best man saved me by asking me one question - why are they eager to sell to YOU? I took a step back and boom! Pandemic

Bitcoin is increasing in price daily but do you understand why? Do you know what to do with Bitcoin after you buy it? Some people buy crypto to use as collateral, others buy it as a hedge. Buying it for speculation is valid but know what you are doing. Have stops.

Even for equity trading in the stock market, I learned to put stops. The people who were wiped out during the last bitcoin crash didn't know how to hedge. You hedge against your hedge. That is what risk management is about. For startups, bet on competitors. YC does it well.