How to Manage Mistakes and Gain from Niches. A Sustainable Approach for Life and Wealth

Wisdom of the crowds, tinkering small bets with big potential, The Long Tail, Reddit and Football, luck vs skill and how to not make money on bitcoin as a bitcoin enthusiast since the beginning of the ride

Diego Quintela
Jan 1 · 5 min read

Augusto Ramos, 50 years old, divorced and a small business owner. As an addicted to social media, Augusto was very fond of sports and politics discussion groups. A turned libertarian by the South American large governments, Augusto was an early believer in bitcoin. He had the chance (and a lot of opportunities since he knew about the coin at its inception) to buy when it was valued at less than 1 USD, but he did not buy it. The lack of Skin in the Game on his own idea cost him, years later, a millionaire life, as Bitcoin topped near 20 thousand USD (before going down to the 6000 USD level, which would still make him a rich man).

Use an incremental part of your portfolio to make those types of bets and let your luck work for you.

“Like a bee colony, it sends out lots of foragers and assumes that one of them will find the best route to the flower fields. You can let a thousand flowers bloom and them pick the one that smells the sweetest.”

From James Surowiecki, Wisdom of the Crowds

We can summarize technological progress as a group of people, tinkering, and the results being dominated by the surviving ideas. Ideas may survive even if they are not right. They survive because they can survive.

To gain from the randomness you need to survive and take advantages of random events. To do that, you need to have a safety net and tinker with small bets with huge potential.

The Long Tail is the idea that the internet allowed that niche groups around the world reunited themselves in groups — Discussion groups, Age of Empires II players, K-pop fans, discussion boards of electric engineering, Frank Sinatra fans at their 20s—.

I would say that Reddit is the best example on the internet that we can find that. I was discussing Canadian Football (soccer for the Americans) in a subreddit with Europeans, Indians, Koreans and Argentinians fans. Of course, Football is the most popular sport in the world and it can’t be called a niche because of the scale. But you can find groups of everything, I’m active on subs as of Finance, Mad Men and The Sopranos discussion, Finance for Canadians, Real Estate in Toronto... You find groups for everything for everybody around the world.

As the Long Tail expands, more niche creation is allowed, more diversified the economy and more the generalist companies suffer from that, because an infinity of small focused brands starts to dominate groups of people and offering more what it is demanded (they don’t need to create an average product for big masses). Shopify stores are good examples of that. And this is also the model that Netflix and Twitter try to operate.

Take advantage of the Long Tail. Everything can be a niche and if you find along the world a thousand people who likes what you like, you should take advantage of that. Monetary gains, intellectual gains and others.

Going back to our South American friend, the problem with Augusto was not his lack of knowledge of Skin in the Game or Austrian School of Economics. Neither was his lack of experience as a risk-taker.

The issue was the lack of exposition to an unlimited upside idea, at a minimal cost (he expended more money on poker and beer). He can argue that he took the best decision with the knowledge Augusto had at the time (and it would be probably right) but he could have made a small value bet, at least.

An sustainable way to wealth is to focus on antiknowledge (what we don’t know) and try to collect as much as we can from positive Black Swan events. Entrepreneurs already know that, so instead of focusing on top-down planning, they tinker as much as they can, trying to benefit from lucky.

This article is for informational purposes only, it should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.

Making of a Millionaire

Stories about money, personal finance and the path to financial independence.

Diego Quintela

Written by Finance, antifragility, Lindy effect, uncertainty history, sports, life.

Making of a Millionaire

Stories about money, personal finance and the path to financial independence.

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