We Study Billionaires - The Investor’s Podcast Network
TIP701: Against The Gods w/ Kyle Grieve
Feb 23, 2025
Kyle Grieve dives deep into the evolution of risk from ancient gambling to modern finance. He unveils how risk management's foundations lie in gambling and explores the significant breakthroughs by thinkers like Pascal and Fermat. The conversation highlights the distortions caused by regression to the mean and the perils of irrational decision-making, as illustrated by prospect theory. Grieve emphasizes the importance of focusing on downside risk and critiques typical diversification strategies. The discussion offers insights into how biases can sabotage investor success.
01:08:31
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Quick takeaways
- The evolution of risk management from ancient gambling has paved the way for modern investment strategies and probability theories.
- Understanding human psychology, including biases and decision-making patterns, is crucial for investors to make rational choices during market fluctuations.
Deep dives
The Evolution of Risk Understanding
Risk has been a critical concept in investing, evolving from ancient gambling practices to modern financial theories. Early forms of gambling, such as dice games in ancient Egypt, laid the groundwork for humanity's exploration of uncertainty. Key figures like Fibonacci, Pascal, and Fermat significantly advanced the understanding of probability, transitioning the perspective from simple luck-based outcomes to calculated odds. Their foundational work set the stage for a more analytical approach to risk in investing, emphasizing the importance of quantifying uncertainty.
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