A lesson from hedge funds
Prior to working in startups I sold trading technology to banks and hedge funds.
It was here that I learned the art of losing.
Smart hedge fund managers know that the goal is to execute a winning strategy, not to win every trade.
Executing a winning strategy over the long term means you must accept losses in the short term.
All hedge funds claim they have an “edge”.
It’s this edge that helps them execute a winning strategy.
For example, when Bitcoin rises by 10% but Ethereum only rises 5% then Ethereum may be more likely to rally. (made up hypothesis)
It’s these kinds of observations that give funds an edge.
Even with an edge however, these hedge funds don’t need to win every trade. Hell, they don’t even need to win fifty percent of the time!
How is it possible to lose more than fifty percent of the time and still get rich?
Well, let’s say you make 10 trades.
You win 3, but lose 7.
As long as you cut your losses short and let your winners ride you can make a healthy profit.
Let’s say each losing trade costs you $10, but each winning trade earns you $100, then:
(7 * -$10) = - $70
(3 * $100) = $300
$300 - $70 = $230 profit 🚀
You’ve just made $230 despite losing 70% of the time.
Those who master the art of losing cut their losses short and let their winners ride.
The same concept is used in poker.
You don’t see professionals play every hand. They fold bad hands, and invest in the good ones.
If you want to be the best sales person then you need to apply the same concept to sales.