Upside risk

The post argues that many angel investors misunderstand the power law of returns, often focusing excessively on mitigating downside risk rather than recognizing the greater risk of missing out on exceptional investments. It suggests that investors should prioritize reasonable pricing and align incentives with founders to capitalize on potential high returns, rather than fixating on unfavorable terms that can hinder opportunities.

Published 2013-03-25 2 min read 359 words 3 topics

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Everyone claims that they understand the power law in angel investing, but very few people practice it. I think this is because it’s hard to conceptualize the difference between a 3x and a 300x (or 3000x) return. It’s co

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Read the full essay on Sam Altman's blog

blog.samaltman.com/upside-risk

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