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Robert Wright & Rob Wiblin on the truth about effective altruism
80k After Hours
Balancing Expected Return and Risk Aversion
In investing, the expected return is calculated based on the probability of making money. However, humans often consider their level of risk aversion in addition to this calculation. An example is shown in a discussion where Sam Bankman-Fried indicated a willingness to take extreme risks with high potential returns, even if the likelihood of catastrophic failure was high. This approach, though enticing due to high expected returns, can be perilous as it significantly raises the possibility of losing everything in the end.
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