In Tony Robbins book Money Master The Game he interviews more than 50 self-made Billionaires, Nobel Prize winners, investment titans, bestselling authors, professors, and financial legends. From this large pool of insightful information and sanguine perspectives he took away 4 distinct traits in which they all share: (the numbered paragraphs are quotes directly from the book - my commentary is below each paragraph)
1) Don’t Lose - All of these Masters while driven to deliver extraordinary returns, are even more obsessed with making sure they dont lose money. Even the worlds greatest hedge fund managers, who you'd think would be comfortable taking huge risks, are actually laser focused on protecting their downside....As Paul Tudor Jones said, "The most important thing for me is that defense is ten times more important than offense...You have to be very focused on the downside at all times." Why because if you lose 50% it takes 100% to get back to where you started.
Avoid concave options! It sounds simple becasue it is. If you lose sight of this fact you will be amazed at what black swan events that will come out of the blue and hurt you. As mentioned in the chapter in Anti Fragile called via negativa, avoiding harm can be much more beneficial than seeking reward. Limit your downside. Make sure if something bad can happen it can't hurt you past a certain predetermined threshold.
For example say you exercise but are a pack a day smoker. According to optionality you'd be much better off quitting smoking than exercising. Why? Because the smoking is a negative option - it can kill you. You get small nicotine highs (small gains) with the looming threat of emphazima or lung cancer (large loss). It's the equivalent of selling out of the money PUT options on the SPY and collecting small premiums then having a 1987 black Monday crash happen and wipe out your entire life savings in a matter of seconds.
2) Risk a Little to Make a Lot - Each of these Hall of Famers without exception looks for home runs! They look for investments where they can risk a little and make a lot. They call it asymmetric risk/reward.
Sound familiar? By now it should. Although they are talking about the investment world, here I'm showing you that this also applies to your life and decisions you make every day from the food you eat to the choice to read a book or watch the news. Seek upside all the time. You can't know what or when the big moves will happen, but that’s ok. Just know that if you’ve eliminated the downside and are 'buying' convex options within your own life you are bound to be way ahead over time.
3) Anticipate and Diversify - The best of the best anticipate; they find the opportunity for asymmetric risk/reward. They really do their homework until they know in their gut that they are right -- unless they're not! And to protect themselves, they anticipate failure by diversifying.
Ray Dalio - the head of the world largest hedge fund knows enough to know that he doesn’t know anything - nobody does. We can cannot know what the future will hold, all we do know about the future is it will contain events that we don't know currently, because if we did then it wouldn't be the future. So the only way for you be able to gain from all the convex options is to spread them around, don't be too concentrated in one particular field. This is the method nature uses. Every tree, plant and flower doesn't know where it's progeny will grow. It doesn't have to. All it has to do is spread it's seed (positive options) in every direction. So following this advice, read all you can about diverse subjects. Try new things, meet new people and ask a lot of questions. Be curious. As John Wooden said "You'll be amazed at what you learn after you know everything."
4) You're never done - Contrary to what most people would expect, this group of achievers is never done! They're never done learning, they're never done earning, they're never done growing, they're never done giving!
This is the simple advice offered by Phil Knight - just keep moving forward, no matter what. If you get knocked down dust yourself of and fight again. Learn from your mistakes and befriend failure. View it as the oracle of wisdom that it is, as it's giving you valuable information, much more than information about what works. When scientists design experiments, they do so with failure in mind. They know there is so much information to be learned about why something didn't work the way it should have.