Written by: Thiccy
Compiled by AididiaoJP, Foresight News
The era of speculation with high risk appetite
(The article contains a small amount of mathematical calculations, but the logic is clear and easy to understand.)
Suppose you participate in this coin tossing game. How many times will you toss? The rule of this game is that if it is heads, your assets increase by 100%; if it is tails, your assets lose 60%
At first glance, this game looks like a money-printing machine. The expected value of each coin toss is positive 20%, which means that if you toss a coin once, your assets will have an expected growth of 20%. In theory, if you toss the coin enough times, you can accumulate the wealth of the world.
However, the reality is that if we simulate 25,000 people each flipping a coin 1,000 times, almost all of them will end up with zero.
This result is due to the multiplicative effect of repeated coin tosses. Although the expected value (arithmetic mean) of the game is a positive return of 20% each time, the geometric mean is negative, which means that the compound interest of this game is actually negative in the long run.
How to understand this? Here is an intuitive explanation:
The arithmetic mean measures the average wealth created across all possible outcomes. In this coin-tossing game, wealth is highly concentrated in the unlikely scenario of consecutive heads. The geometric mean measures the wealth associated with the median outcome.
The simulation above shows the difference. Almost all paths go to zero. In this game, you need to get 570 heads and 430 tails to barely break even. After 1,000 tosses, all of the expected value is concentrated in the 0.0001% of consecutive heads that occur, the extremely rare cases of consecutive heads.
The difference between the arithmetic mean and the geometric mean creates the so-called jackpot paradox. Physicists call it the ergodic problem, and traders call it volatility loss. When expected value is locked into an event with a very small probability, it is unlikely to be realized. Excessive pursuit of small probability events will cause volatility to turn positive expected value into a path to zero.
Crypto culture in the early 2020s is a vivid example of the jackpot paradox. SBF started the conversation by tweeting about wealth preferences:
Logarithmic wealth preference: each dollar is worth less than the previous dollar, and risk appetite decreases as capital grows.
Linear wealth preference: Every dollar is worth the same, regardless of how much profit has been made, maintaining the same risk appetite.
SBF proudly proclaims his linear wealth preference. Since he plans to give away his entire fortune, he believes doubling from $10 billion to $20 billion is just as important as making $10 billion from $0, so high risk and high reward are justified.
Su Zhu, founder of Three Arrows Capital, also agrees with the linear wealth preference and further proposes the exponential wealth preference:
Exponential wealth preference: each dollar is worth more than the previous dollar, and as capital grows, risk appetite increases and there is a willingness to pay a premium for extremely low probability events.
How do these three wealth preferences manifest in our coin tossing game? According to the jackpot paradox, it is clear that SBF and Three Arrows Capital are flipping coins infinitely, and this kind of thinking is how they originally accumulated wealth. It is also not surprising that SBF and Three Arrows Capital both ended up losing tens of billions of dollars. Perhaps in some parallel universe, they are already trillionaires, which proves the rationality of their risk-taking.
These liquidations are not only a cautionary tale about the mathematics of risk management, but also reflect a deeper macro-cultural shift toward a preference for linear and exponential wealth.
Founders are expected to adopt a linear wealth mindset, acting as cogs in the venture capital machine, betting big in a way that maximizes expected value. Stories of Elon Musk, Jeff Bezos, and Mark Zuckerberg betting everything and becoming the richest people in the world reinforce the myths that drive the entire venture capital field, while survivorship bias easily obscures the millions of entrepreneurs who have gone to zero.
This preference for excess risk has permeated everyday culture. Wage growth lags far behind the compounding of capital, causing ordinary people to increasingly pin their real upside opportunities on jackpots with negative expected values. Online gambling, zero-day expiration options, retail meme stocks, sports betting, and crypto meme coins are all examples of the preference for exponential wealth. Technology has made speculation more widespread, and social media has spread every story of getting rich overnight, luring the public into a huge losing gamble like moths to a flame.
We are becoming a culture that worships the jackpot and prices the cost of survival at zero.
AI exacerbates this trend by further devaluing labor and exacerbating winner-take-all outcomes. The technological optimists dream of an AGI-rich world where humans devote their days to art and leisure, but the reality is more likely to be billions of people chasing negative-sum capital and jackpots with UBI subsidies. Perhaps "forever up" should be redesigned to reflect the blizzards experienced by those paths to zero - this is the true contour of the jackpot era.
In its most extreme form, capitalism behaves like a collectivist hive. The mathematics of the jackpot paradox suggests that it is rational for a civilization to treat humans as interchangeable labor, sacrificing millions of worker bees to maximize the linear expected value of the colony. This may be most efficient for overall growth, but it is cruel to the worker bees.
Marc Andreessen’s techno-optimist manifesto warns: “People should not be kept in captivity; they should be useful, productive, and dignified.”
But rapid technological development and increasingly aggressive risk appetite are pushing us toward the outcome he warned about. In the age of jackpots, growth is fueled by the enclosure of the same kind. Usefulness, productivity, and dignity are increasingly confined to the privileged few who win the competition. We have raised the mean at the expense of the median, leading to a widening gap in mobility, status, and dignity, and an economy that breeds an entire negative-sum culture. This externality manifests itself in social unrest, starting with the election of demagogues and ending in violent revolution, which is costly to the compounding growth of civilization.
As someone who trades the crypto markets for a living, I’ve seen firsthand the depravity and desperation this cultural shift has spawned. My victories have been built on the corpses of thousands of other traders, a monument to wasted human potential.
When industry insiders ask me for trading advice, I almost always see the same pattern: they risk too much and draw down too deep. The underlying cause is usually a scarcity mentality: an anxious feeling of “falling behind” and an urge to make a quick comeback.
My answer is always the same: Build more edge, not more risk. Don't kill yourself chasing the jackpot. Logarithmic wealth is the key. Maximize median results. Create your own opportunities, avoid drawdowns, and one day you will succeed.
But most people will never be able to build a sustained advantage. “Win-win-win” is not a scalable proposition, and in this race to techno-feudalism, meaning and purpose have become winner-take-all. Which brings us back to meaning itself. Perhaps we need some kind of religious revival, reconciling ancient spiritual teachings with modern technological realities.
Christianity was popular because it promised universal salvation. Buddhism was popular because it claimed that anyone could attain enlightenment.
The modern version must similarly offer dignity, purpose, and alternative paths for all people, lest they self-destruct in their pursuit of the jackpot.
The psychological basis of the era of high risk appetite speculation
This obsession with the jackpot has deep psychological roots. The human brain evolved a strong preference for immediate rewards, a mechanism that aided survival in hunter-gatherer times but has become a trap in modern financial environments. The dopamine system is extremely sensitive to the potential for high rewards, even if the actual probability is tiny. Neuroscience research shows that when people fantasize about winning a jackpot, the brain activates in almost the same way as when they actually receive a small, guaranteed, ongoing reward.
Social media and fintech products cleverly exploit these neural mechanisms. Infinitely scrolling information feeds, instant trade execution, and dazzling profit displays create a perfect addictive loop. Every success story is amplified by the algorithm, while countless failures are quietly filtered out. This distorted information environment reinforces the illusion that "I might be next."
Failure of the education system
The modern education system has, to some extent, fostered this jackpot mentality. Standardized tests and elite selection mechanisms are essentially a winner-takes-all competition, and students are instilled with an "all or nothing" mindset from an early age. The star effect in the arts, sports and other fields further reinforces this idea. When young people enter society, they are already accustomed to defining success as extreme results rather than gradual accumulation.
College education is increasingly viewed as a lottery, with a few getting huge returns through the halo of a prestigious school, while the majority are burdened with heavy loans and limited gains. This structure naturally leads people to seek other forms of "lottery" - whether it is cryptocurrency, the influencer economy or the entrepreneurial boom.
The financial system is fueling the crisis
The modern financial system is technologically the perfect engine for jackpot culture. Zero-commission trading, leveraged products, and derivatives allow ordinary people to engage in speculation that was once only available to professional institutions. Algorithmic market makers and dark pool trading create the illusion of liquidity, masking the actual negative-sum nature of the game.
The venture capital industry has institutionalized the logic of the first prize. Successful funds often rely on a few projects with 100-fold returns to make up for the majority of failed investments. This model is regarded as the golden rule, but few people question its long-term impact on the innovation ecosystem. When all resources are chasing possible unicorns, those companies that steadily create medium returns are not supported.
The collapse of social mobility
The prevalence of jackpot culture is closely related to the decline of social mobility. When the opportunities for the middle class to achieve class transition through traditional paths (education, career advancement) decrease, extreme speculation naturally becomes an alternative. The financialization of the real estate market has turned housing from a basic need into a speculative tool, further exacerbating this trend.
The widening intergenerational wealth gap creates a vicious cycle: Young people without family wealth support are more inclined to high-risk behaviors, which in turn leads to greater wealth polarization. When the social safety net is weak, people’s tolerance for “all or nothing” bets is paradoxically increased.
The Dilemma of Technological Accelerationism
The current narrative of technological accelerationism resonates dangerously with jackpot culture. The blind worship of exponential growth ignores the fundamental limitations of physical and social systems. While every startup claims to “change the world,” the actual output is often zero-sum or negative-sum financial engineering.
This is particularly evident in the blockchain and AI sectors. Most projects do not create substantial value, but instead attract capital through complex token economics and arbitrage opportunities. The result of this financialization of technology is a frothy ecosystem where real innovation has difficulty gaining resources and attention.
Possible solutions
Reversing the jackpot culture requires reforms at multiple levels:
Financial regulation: Limit the availability of leveraged and speculative products, and strengthen behavioral regulation of financial technology.
Education reform: Cultivate students' probabilistic thinking and long-term planning abilities, and reduce excessive emphasis on rankings.
Tax policy: impose heavy taxes on short-term capital gains and encourage long-term investment.
Media responsibility: requiring social media platforms to balance the risks and rewards of displaying speculation.
Social protection: Build a better safety net to reduce the financial pressure on people to take risks.
Ultimately, we need to redefine the criteria for success. A healthy society should reward continuous value creation rather than occasional lucky breakthroughs. This requires a comprehensive transformation from personal mentality to institutional design, and it is also a difficult long march to fight against deep psychological preferences.
