Diversification is a hedge against the lack of knowledge, and a nice tool for preserving existing wealth. It will keep you moving up and to the right over time, but won’t make you rich.
If you have the time and resources to think deeply about where the world is going, making a number of high-conviction, asymmetric bets while young is the easiest way to secure your financial freedom far before retirement age. Yet, personal finance gurus tout index funds, and the foolishness of individual stock picking. This turns individuals into painfully risk-adverse market participants, settling for the status-quo and lacking any sense of agency. While passive investing is likely best for most, for the curious, information asymmetry is alive and well in markets and waiting to be arbitraged.
It is not an impossible game. It comes down to a delicate dance between conviction and position sizing. You must have strong enough conviction to hold through gut-wrenching drawdowns and weather a sea of doubters (being right in non-consensus positions provides the biggest upside—but going against the grain isn’t easy). You must also have enough size on to make a meaningful difference if right, but not enough size on to get shaken out if the price moves against you. Lastly, failed bets are expected. When placing asymmetric bets, a number of small failures will be dwarfed by a single winner with explosive upside. Never go all-in.
Sure, there’s an element of gambling to speculation. But to really develop conviction in a bet (and to parse enough signal to take a bet in the first place), it takes a deep dive into one or more fields. Our hyper-specialized careers often prevent us from studying other things. I have learned more from due diligence around my investments than in college. A little skin in the game, and you really start paying attention. The intellectual capital gained through active investing is positive-sum.
Maybe when the college debt bubble pops, a portion of this freed-up capital will go towards token-based equity bets made possible by cryptoassets, turning everyone, regardless of age, experience, connections or budget into micro-VC’s—not just the Silicon Valley elite. This will incentivize learning and divergent thinking outside of one’s career bubble, while helping to democratize capital formation and bootstrap more innovation.