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@ O.M
2025-03-03 05:23:48
Most people make decisions based on averages—what usually happens. But in high-impact fields like investing, startups, and technology, outliers drive the biggest results.
Instead of asking, "What is the average outcome?" ask:
- ✔ **What is the full range of possible outcomes?**
- ✔ **How can I maximize the upside while protecting against the worst-case scenario?**
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## Example in Action: Bezos, Thiel & Altman
### Jeff Bezos & AWS
When launching Amazon Web Services (AWS), Bezos saw a small chance of massive success—cloud computing dominance—against a limited downside (R&D costs). He optimized for the best-case scenario, which became a trillion-dollar business.
### Peter Thiel & Venture Capital
Thiel’s Power Law investing philosophy is based on distributions: Instead of funding many "average" startups, he focuses on a few outliers that can return 100x or more (e.g., Facebook, Palantir).
### Sam Altman & OpenAI
Altman understands that AI breakthroughs follow an exponential curve—a small chance of creating AGI (Artificial General Intelligence) is worth more than incremental AI improvements.
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## How to Apply This Thinking
### Map the Full Range of Outcomes
Instead of assuming an "average" result, consider:
- **Best-case scenario:** How big can this get?
- **Worst-case scenario:** What’s my downside risk?
- **Unlikely but extreme possibilities:** What are the hidden risks or rare events?
### Optimize for Asymmetric Upside
Focus on decisions where the upside is massive, even if the probability is low.
- **Example:** Launching a new product in an emerging market versus incrementally improving an existing one.
### Protect Against Catastrophic Downside
Even if an outlier event has a small chance, if it can ruin you, avoid it.
- **Example:** Diversifying investments instead of going all-in on one bet.
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## Resources to Learn More
- Understanding Distributions vs. Averages – Farnam Street
- Jeff Bezos on Thinking Long-Term – Harvard Business Review
- Peter Thiel’s Power Law Thinking – NFX
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## Action Step: Apply This Today
- **Pick one major decision you're working on.**
- Instead of assuming an "average" result, analyze the full distribution of outcomes.
- Ask: *Am I optimizing for a rare, high-upside event while managing the worst-case risks?*
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By thinking in distributions, you make better strategic bets, spot hidden risks, and maximize your long-term impact. 🚀