Genie in a Bottle

Imagine if I gave you $10,000. For most of you, you most likely have this amount saved.

You work a 9-5, and this is not that crazy of a thing to do. This is 10% of your salary pre-tax and 20% post-tax.

Now I tell you, you can invest this in anything, over a 10 year window. But obviously, do not just consume, try to grow it.

Now here is the interesting part. You are allowed to use hindsight.

The point of this exercise is: “what would you do the moment I gave you this ability?”

You would look up the biggest rate of growth places you could put the money logically.

You would go back in time, see the stock charts, the realestate valuations, and figure out the exact place to put the money where it would grow the most.

What’s interesting is that a lot of us do not think in this way.

You don’t necessarily even have to put the lump sum in one bucket without hindsight. All hindsight does is reduce risk to 0.

Given risk, or really, ‘lack-of-knowing’, ‘lack of prediction’, you would divvy it up across multiple things. In reality, if we are to divvy it up perfectly evenly, this means we know nothing about everything. However this is not true. This is a common theme in Warren Buffet’s essays.

Furthermore, the strategy can shift, as we can water the flowers, and prune the weeds, per the philosophy of Peter Lynch.

The main point of this essay however, is that you have the benefit of hindsight. You have the information, and you can make a perfect bet.

So then, we should strive, in our day to day, to get as close to the perfect bet as possible. To do so, we must first define the perfect bet given this scenario.

Ultimately, we must put our money and resources into things that have the highest rate of return.

You could say, that this is the entirety of the game.

Another philosopher in this arena that states: “Growth is everything” is Paul Graham from Y Combinator.

This might be the only yardstick we need when deciding between places to put our energy.