Crypto Markets Encourage Bold Risks Like Bezos Amazon

Charlie Munger, a renowned investor, once shared that in 50 years of reading Barron’s, he found just one investable idea. This idea, involving the auto parts company Tenneco, turned out to be exceptionally profitable. Munger invested around $5 million after reading about Tenneco in a Barron’s article and, two years later, the company was taken private at 15 times the price he paid. This investment was then rolled into a fund managed by his friend, Li Lu, who more than quadrupled the money. Munger’s experience underscores the potential of a single great investment idea to offset numerous losses.

In the world of business, the upside potential is virtually unlimited. Jeff Bezos, the founder of Amazon, exemplified this philosophy by constantly taking bold risks. Many of his ventures, such as personalized “zShops,” auto retailing, and partnering with Toy“R”Us, failed to gain traction. However, his willingness to swing for the fences led to groundbreaking innovations like Amazon Web Services, which now scales to infinity. Bezos’s strategy of taking high-conviction risks, even when the odds of success were low, ultimately paid off for Amazon.

This approach to risk-taking is particularly relevant in the context of crypto markets. Permissionless capital markets, which allow anyone to take a swing at building something significant and back them, encourage this kind of entrepreneurial spirit. During a recent event, various innovative use cases for crypto were discussed, including AI arbitration, turning data into an asset class, and accelerating the development of personalized medicine through decentralization. These ideas, while speculative, highlight the potential of crypto to foster groundbreaking innovations that might not be encouraged in more centralized markets.

While the stock market has centralized gatekeepers that may stifle such risky bets, crypto markets offer a more open and permissionless environment. This environment is well-suited to the Bezos model of swinging hard at every reasonable pitch, regardless of the odds of success. Just as Amazon became a global powerhouse by taking bold risks, crypto markets could similarly thrive by being the best place to fail. This philosophy encourages entrepreneurs to take irrational risks, knowing that society captures the uncapped upside of all that risk-taking without bearing any of the downside risks.