VC is by definition not investing in black swans, since there is a long history of exits and failures to the point that PG & co can make claims like '1 company invested in per YC will pay for all the rest'.
VC is merely extremely risky but so far positive expected value.
I'm not sure if you're entirely correct here. True, VC has had a long history of exits and failures. However, PG & co have generally had a better history of Black Swan-type events in their portfolio (e.g. Dropbox).
Taleb's Black Swan theory and approach to hedge fund management is similar to VC.
From his Wikipedia entry: "As a trader, his strategy has been to safeguard investors against crises while reaping rewards from rare events, and thus his trading career has included several jackpots followed by lengthy dry spells."
His fund steadily and intentionally loses money or breaks even on a normal day, but vastly outperforms other funds on days when the market swings wildly in either direction. The strategy is not for the faint of heart.
> I'm not sure if you're entirely correct here. True, VC has had a long history of exits and failures. However, PG & co have generally had a better history of Black Swan-type events in their portfolio (e.g. Dropbox).
I don't see how Dropbox is a black swan. 'Wow, another Internet company went to billion-dollar valuation? Who could possibly have seen that coming?' Pretty much anyone who has been breathing since the Netscape IPO...
> From his Wikipedia entry: "As a trader, his strategy has been to safeguard investors against crises while reaping rewards from rare events, and thus his trading career has included several jackpots followed by lengthy dry spells."
Yes, that's his strategy for exploiting convexity, but Taleb is the one insisting on 'Black Swan' as a term for the unpredictable and unpredicted, not me. I am merely pointing out that by Taleb's lights - the inventor of the term - VC is not a black swan.
> His fund steadily and intentionally loses money or breaks even on a normal day, but vastly outperforms other funds on days when the market swings wildly in either direction. The strategy is not for the faint of heart.
They also failed, BTW. Even in 2001 his Empirica fund turned in a crappy performance; and personally, if you set up a fund to exploit sudden market shocks and you can't profit handsomely off 9/11, you have failed and partially discredited your overall thesis.
VC is merely extremely risky but so far positive expected value.