Interesting article, which went viral: The Straussian Path.
The theme of the article is maximizing one’s own convexity at life. To recap, the term ‘convexity’ and the related neologism ‘optionality’ have become popular in recent years, especially on social media, to describe an investment or other strategy that has a high potential upside and a capped downside. The term optionality describes situations which have this asymmetry, and not just limited to option trading. An internship may have optionality in the sense of having limited downside, that being your time, and significant upside if you land the job.
Shown below is the payoff diagram of a call option, which exhibits positive convexity:
The upside is potentially unlimited as the stock rises beyond the strike price, but the downside is capped at the premium paid for the call option.
The math underlying options shows that the expected value of any combination of long/short options and cash strategies equals the compounded return of 100% cash earning the risk-free rate over the option’s duration, so there is no ‘free lunch’ by blindly buying calls.
The convexity argument is severely limited by two factors: the low odds and less upside than assumed. What matters more is the expected value, which is often overlooked in these convexity or optionality arguments. Or more specifically, the expected value conditional on not being ruined or otherwise breaching a lower absorbing barrier, but I will ignore this.
My take is convexity is overrated, and that the ‘tried and true’ route of careers is better (or more specifically, has a higher expected value), especially if you have the talent to land a decent tech job. The vast majority of people lack the risk tolerance or inclination to do it on their own. And not to mention, in the context of entrepreneurship, everything is much harder today compared to as recently as 3-5 years ago, and keeps getting harder with every passing year due to competition (now made worse by automated AI content generation), higher barriers to entry, and sites cracking-down on self-promotion. Everything–from reselling on Amazon to gig work like Uber–is saturated to the gills.
If you’re in the top .1% of verbal/writing ability, maybe you can make a living and get readers on Substack and Twitter. Like Curtis Yarvin and others. Or top .1% of analytic ability, such as the ability find subtle/hidden niches or techniques to make money. Like people who play online poker for a living. Statistically speaking, it goes without saying, the vast majority of people are neither.
Regarding the limited returns/upside of convexity, Bitcoin is widely touted as a high-convexity investment, except that returns have been much worse since late 2017 compared to 2010-2017. If you’re still buying Bitcoin or other crypto, you missed that train. At best you will capture the returns of the S&P 500, but with much more volatility.
For the above reasons, I have long recommended the college-to-career route, and then investing the proceeds into rapidly compounding assets such as QQQ/SPY and or real estate–as an effective way to get rich, as opposed to entrepreneurism or other alternatives.
He writes, “The average smart intelligent kid will have their pick of a few paths in their 20s; atleast in my circles it was some derivative of consulting, law, finance, trading, medicine, VC, startups, or being artfully unemployed.”
I agree with “consulting, law, finance, medicine,” but VC and startups are either too high risk and require starting capital, which the typical broke 20-something college student lacks. I am not sure why trading is included, as that also entails lots of risk and initial starting capital, unless you’re trading as an employee of a firm. If you’re hired at Jane Street, you’re still guaranteed good pay if you’re a mediocre or even bad trader (sure, you may not last long, but the downside is still shouldered by the firm).
Continuing, “What’s the most convex thing? Startups have almost uncapped upside, salarymaxxing (law, consulting, non-trading finance, medicine) has safety and stability (constant $/amount in your bank) but often no convexity.”
But the claimed “unlimited upside of startups” is negated by the very high failure rate, opportunity cost, and low pay, so the expected value is actually worse compared to the college-to-career route. Founders are working for peanuts at the prime years of their life, when instead they can be salary-maxing and S&P-500-maxing.
Based on my experience on popular subreddits, such /r/FatFire, this is how many 20-30-something are getting rich, by plugging-away at white collar jobs, keeping expenses low, and investing their income in rapidly-appreciating assets like Nvidia stock. Unless you’re Sam Altman or an early Anthropic employee, it’s hard to beat this strategy or blueprint for wealth.
Moreover, a job does have convexity: that being promotions and RSUs. But with almost no downside, except being fired, but even then you still keep your accumulated earnings, plus severance or other bonusses (and vested RSUs). When plotted out, the there is almost no downside to careers, but lots of upside from promotions, raises, stock options, etc.
Regarding startups, the math is pretty bleak, and has only gotten worse. Y Combinator has funded over 5,000 companies since its founding in 2005. As of 2025, only around 250 achieved any sort of an ‘exit’, in which the founder could make a windfall. And even then, the results are still skewed by outliers. In reality, closer to 5-10 startups have made their founders very wealthy, such as Coinbase, Stripe, or Dropbox. Notably, these tend to be companies founded before 2015 or so, after which success rates drop, probably due to increased competition and rising costs.
Labor, advertising, IT, security audits and other costs associated with tech startups have surged since 2010 on an inflation adjusted basis, tracking the broader post-’08 tech boom. The post-crisis successes of FAMNG+ companies has inflated costs, which are disproportionately felt by startups, but huge companies with pricing power and fat profit margins are much more insulated, whereas startups are not. Startups must offer much higher salaries to compete with FAMNG+ companies, increasing the failure rate.
Except for possibly AI, startups are not as lucrative today as they were pre-2013 or so. Also, the odds of getting into the Y Combinator program are only 1-2%, so you’re looking at a 1/1000 odds of an exit conditional on being accepted. For the remaining 4750 companies that do not exit, either they fail or hang on, but with much more work and less job security compared to a regular tech job. Unless you’re one of those outliers who creates the next Dropbox, the value proposition is not that great.
He continues: “Trading means the only thing you’ll really do for most of your career is play a game that virtually has no tangible outputs for the ‘real world’ with more stable base case than startups but with less ease to access and scalp convexity. VC is similar.”
Optimizing capital efficiently benefits the economy though, whether VC or trading. Imagine it’s 2001; investing $1 million in Google would have done much more for the economy and yourself than investing that same $1 million in Enron. Over the long-run the market helps to allocate capital optimally even if the majority of traders fail.
. At brunch today with my dear friend @apralky, we both agreed that Thiel’s view on on original idiosyncratic thought being rare is completely correct and underpriced. Peter Thiel was right – Idiosyncratic thinkers are the mental equivalents of olympic medallists.
It’s not underpriced for the above reason: high failure rate and hence low expected value. For something be truly underpriced it needs to have a higher expected value than the imputed expected value. This means a sort of information asymmetry. The vast majority of people lack the inclination or talent to find any. Regarding ‘Idiosyncratic thinkers are the mental equivalents of Olympic medalists,’ this is also wrong. The Olympics has specific rules and routines, in which points are deducted for not following them exactly. ‘Sticking the landing’ poorly for gymnastics can mean the loss of points. Idiosyncratic thinkers by definition do not follow rules.
trading is what I would say is the max-risk, max-convexity play but even trading convexity can be seen as trivial compared to startups. The best macro PMs will bring in >100MM/yr in PnL, assuming 20% PnL cut (varies a ton by firm), they will take home 20mm/yr which we can say is ~10mm/yr post tax. To get to that level, you’d probably have to spend atleast ~10 yrs in trading, and that’s close to your ceiling.
The best traders can own a firm, and make way more than just $10 million. More like billions. Once you establish a reputation, the upside is effectively unlimited similar to startups. By that point, investors will be begging you to invest their money, so getting started should be no problem. Unless you’re Elon Musk or something, startups have the opposite problem: needing to beg for money, often at unfavorable terms.
To experience maximal convexity, you need to be close to the best at what you do. Everyone is born w/ their own “idiosyncratic juice” – talents, something that they have that others truly don’t.
This is a great point. In my case, this was trading and investing. But alluding to above, most people either do not know ‘what they are good at’ or such talents are not remunerative, hence careers. But if you can lock-in on a profitable talent, then more power to you.