Risk, Volatility, and the Evolution of Courage

Most advice about investing follows a standard template: diversify, dollar-cost average, gradually reduce risk as you age. This advice isn't wrong, but it misses something important.

What it misses is that your relationship with risk is something you can train, like a muscle.

In 2016, I had what I can only describe as a 'lightning strike moment' when I realized crypto was going to become a whole new asset class. It was visceral, almost religious in its clarity. For a while after that, I had nearly 99% of my net worth in crypto.

That sounds insane to most financial advisors. And it would be insane for most people. But there's a specific case where it might not be: when you're young, have a reliable income, and no dependents.

This isn't an essay about crypto specifically. It's about the value of experiencing volatility firsthand, early in your investing life.

Now I have two young kids and a different risk profile. I'm still incredibly exposed to crypto by any standard, but I've diversified. Here's something interesting: market drops of 10-15% in stocks don't phase me at all. After experiencing multiple +80% drawdowns in crypto, traditional market movements feel trivial.

That's a psychological edge most investors don't have.

Most people's first serious encounters with investing come when they already have responsibilities—mortgages, children, retirement planning. They're starting at a point where they should already be conservative. So when they experience even moderate volatility, it feels catastrophic.

But what if the optimal path is actually to expose yourself to extreme volatility when you can afford it emotionally and financially?

Traditional education teaches investing principles on paper. But there's a world of difference between understanding volatility intellectually and experiencing it viscerally. You need to feel the emotions—the fear, the doubt, the temptation to sell at the bottom. You need to make mistakes when the stakes are still relatively low.

I learned this the hard way during the 2018 bear market. I watched Bitcoin plummet from $20,000 to $3,000 without having taken any profit. It was excruciating. I nearly threw in the towel.

I remember calling a friend who was also heavily invested. I was on the verge of tears. He told me to relax, take a walk, close my computer, and not read anything market-related for a week. 'Bitcoin will keep chugging along,' he said. He was right.

These moments test your conviction. You have to constantly reunderwrite your thinking, asking yourself: 'Do the fundamental reasons I invested still hold true?' This constant reassessment builds intellectual rigor that textbooks can't teach.

Our world is shaped by tail events far more than we like to admit. World War II, the '09 crash, COVID—these aren't footnotes in history; they're chapters. How you respond during these extraordinary moments often determines your long-term outcomes.

Crypto markets essentially speed-run market cycles. What might take the stock market a decade to experience, crypto can go through in a year. That concentrated experience builds a kind of emotional resilience that's hard to acquire any other way.

Does this mean everyone young should pile into volatile assets? No. The specific path doesn't matter as much as the principle: find ways to experience significant volatility and tail events early, when you can afford the tuition payments of emotional distress and occasional financial losses.

Risk tolerance isn't static. It evolves with your life circumstances. The birth of a child can instantly transform your time horizon and goals. But if you've already built the muscle of handling volatility, you're better equipped to make that transition wisely rather than fearfully.

I'm in that transition now. In some respects, I wish I could still take the kind of risk I did in 2016, but I realize that would be foolish with two young children depending on me. As many smart people have written, making wealth and keeping it are two very different skill sets. You concentrate to get rich and diversify to stay rich.

Most investing advice optimizes for avoiding mistakes. But maybe the optimal long-term strategy is to make your mistakes early, when the absolute dollar value is lower, and the lessons are proportionally more valuable.

As Taleb would say, you want to be antifragile—not just resistant to volatility and uncertainty, but actually strengthened by it. This antifragility comes from lived experience, not books.

When I was 99% in crypto, I constantly evaluated the worst-case scenario: a day-zero hack where it all went to zero. I really tried to imagine what it would be like if those assets went to nothing. Would that be horrific? Yes. But I was earning a decent income and young enough that I could start again if I had to.

Did it make sense to go 'all in'? I felt I had done the work. I had read absolutely everything I possibly could on Bitcoin and crypto and the birth of Ethereum and smart contracts. Reading Joel Monegro's Fat Protocol thesis on the day he wrote it was the epiphany I needed. My conviction wasn't blind faith—it was built on hundreds of hours of research.

The market tested that conviction repeatedly. Beyond that 2018 crash from $20,000 to $3,000, I lived through the COVID flash crash of March 2020, watching Bitcoin plummet nearly 50% in a single day. Each cycle taught me something different about market psychology and my own risk tolerance.

For years, people laughed when I talked about crypto. I became embarrassed to tell others what I was really into. But looking back, that social discomfort was actually useful—it meant I wasn't just following the crowd. The biggest returns often come from ideas that seem strange to most people at first.

You have to play the game on the field, not the one you wish existed. Our economy has been financialized in virtually every possible aspect. With constant debasement and the Cantillon effect—where money creation benefits those closest to the printing press—you need hard assets just to stay in place.

This reality wasn't obvious to me at first. But as I studied monetary history and watched central bank balance sheets explode post-2008, it became clear why Bitcoin's fixed supply was more than just a technical feature—it was a profound innovation in a world where everything else could be diluted at will.

The financial world doesn't reward the traditionally prudent as much as those with the courage to act when there's 'blood in the streets.' During these tail events—these moments of maximum fear—most people don't just freeze; they panic and sell, which is usually catastrophic to returns. These are precisely the moments that determine long-term outcomes.

Turns out you have to get used to being the odd one out if you want asymmetric returns in life.