Sleep per Day: (Target) 7h30m / day (Actual) 7h30m / day (96 day average)
I made a terrible mistake in thinking through the problem of black swan events in decision making (original article).
Using insurance as an example, the decision of whether to buy critical disease illness DOES NOT boil down to whether I can afford the expected utility value of cancer treatment.
Instead it boils down to if I can afford the full cost of a black swan event (critical disease in this case) when it does visit me.
If I can’t without insurance, then I must ensure I can with insurance, because having enough money or insurance to cover only the expected utility value won’t protect you when a black swan event does happen, because in the face of a black swan event, you can either afford it or not. There’s no middle way.
Which is why the quote “Only invest what you can afford to lose” holds a lot of wisdom. Even if the probability of having all your wealth getting wiped out in investing is low (eg. investing in only wide moat stocks at extremely cheap valuations), the probability is still there, and if you’re lucky/unlucky enough to have the low probability black swan event happen to you, you need to make sure you weren’t all in with your investments.
And another thing I want to point out that was a mistake in the previous “Considering Black Swan Events For Decision Making” article was the payout ratio of the critical disease insurance being sold by my friend. I won’t disclose the insurance company since I have no benefits in promoting them, but at around $300 HKD / month I can ensure that once a critical disease like cancer hits me with a hefty 40,000 USD to 138,000 USD, I am fully covered.
Also another thing that this insurance buys me is being comforted by the fact that my mum has at least a decent amount of money to fall back if I die before she does. If I don’t die, at least the financial burden of the critical disease won’t affect my mother, which is another great thing about this deal.
Not advice. No offer. Do not rely. May lose value. Risky. Conflicts hidden/obscured. (Borrowed from Terrence Yang‘s Disclaimer on Quora)