Economics & Markets

Seek situations where the upside is uncapped and the downside is limited. The expected value of a decision depends not just on probability but on the magnitude of outcomes in each direction.

Structural obstacles that prevent new competitors from entering a market, protecting incumbents and enabling sustained profitability.

The difficulty of getting individuals to cooperate for shared benefit when each has an incentive to free-ride on others efforts.

The principle that entities should specialize in activities where their opportunity cost is lowest, even if another party is absolutely better at everything.

Schumpeter's theory that capitalism progresses through cycles where innovative entrepreneurs destroy established industries to create new ones.

Unit costs decrease as production volume increases, creating cost advantages that compound with scale and make larger competitors structurally difficult to undercut.

The advantage (or disadvantage) of being the first entrant in a market, where early entry creates switching costs and brand recognition but also bears exploration risk.

The mathematical study of strategic interaction between rational agents, where each players outcome depends on the choices of all participants.

The dynamic where early advantages compound through positive feedback loops, creating winner-take-most outcomes in technology and platform markets.

When one party in a transaction possesses materially more relevant information than the other, creating adverse selection and moral hazard.

The counterintuitive observation that efficiency improvements in resource use often increase total consumption rather than reducing it.

When one party takes excessive risks because they are insulated from the consequences, which are borne by another party.

A state where no player can improve their outcome by unilaterally changing strategy, given what all other players are doing.

The value of the best alternative foregone when making a choice — the true cost of any decision is what you gave up to get it.

A game theory scenario where two rational agents, acting in their individual self-interest, produce a worse outcome than if they had cooperated.

The principle that decision-makers should bear the consequences of their decisions, aligning incentives and filtering out fragile strategies.

The fundamental market mechanism where prices adjust to balance what producers will supply with what consumers will buy.

The conflict of interest that arises when an agent making decisions on behalf of a principal has different incentives than the principal.

When individuals acting in rational self-interest deplete or degrade shared resources, producing collective harm.

Markets where small differences in performance or positioning lead to disproportionate concentration of rewards in the hands of a few winners.