Was thinking recently...
So why trading works? ("official explanation" that is) - it's risk premium., i.e. if you're willing to take the risk, you can expect to get a positive return for it. Then you just need to make sure you don't take on too much concentrated risk from one source so that any one catastrophic event wouldn't wipe you out - hence diversification...
So, does the same idea work in other areas of life? Like for example you might have a choice between buying a new thing in store with a warranty or a used thing from a private person (say car, fridge, or something), apart from just the feeling of a brand new thing, there's a risk that the used device is defective, but by taking that risk (and especially lots of small risks like that) you can expect to be better off on average in the long run..
Not an original idea, it was mentioned in "Thinking Fast and Slow” and other places ...
Although, there's probably still a difference between "taking risk" to get higher return and just "doing something stupid”., same as in trading - not all the strategies are equally good, like something that Jim Simons is trading probably has a much better risk\reward ratio than what an average Joe is doing e.g. long-only investing in S&P500..
