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Use Insurance To Avoid Ruin
- Buy insurance to protect against rare catastrophic financial events.
- Paying small premiums prevents a single unexpected event from ruining your finances.
Insurance Is A Tail-Driven Business
- Insurance businesses themselves are driven by fat tails: many small claims and few massive payouts.
- If insurers misprice tails they can become insolvent, as seen in AIG during crises.
Survive First, Chase Upside Second
- In investing, prioritize survival over maximizing short-term profits to stay in the game long term.
- Keep most money in safe assets and a small part for high-risk upside; avoid leverage.