Are there risks associated with Naval's "decentralized investment philosophy"?

Absolutely, there are significant risks—and they shouldn't be underestimated.

Naval's philosophy is incredibly appealing, especially for ordinary people like us seeking opportunities outside traditional paths. It paints an idyllic picture: as long as you have the brains and the courage, you can bypass traditional "gatekeepers" (like big banks and institutions) and directly participate in cutting-edge value creation.

But this philosophy is a double-edged sword—a sharp one. Let's talk about the other side: the tangible risks.

Risk #1: It Sounds Great, But "Anyone Can Invest" Doesn't Mean "Anyone Can Invest Well"

Naval advocates for the democratization and decentralization of investment opportunities, allowing everyone to invest like angels in startups and crypto projects.

• The idea sounds like this: Break down information barriers so ordinary people can invest in the next "Google" or "Bitcoin."
• The real-world risk is this: Professional venture capitalists (VCs) and angel investors have teams, professional analysis, due diligence processes, and deep industry networks to cross-verify information. They might look at 100 projects before investing in 1 or 2.

And us ordinary folks? Our sources of information are limited. We can easily be swayed by a project's "story" or market "hype." We lack the capacity to vet a project's code, the founding team's background, or its financial health.

Analogy: It's like handing a Formula 1 race car to someone who just got their driver's license. Theoretically, they have the same tools as a professional driver, but the likely outcome is a crash and burn. Decentralization gives you the "right to play," but it doesn't give you the skill to "win the race."

Risk #2: The Flip Side of "Asymmetric Payoffs" is "Extremely High Failure Rates"

A core part of Naval's thinking is seeking "asymmetric opportunities" – places where you bet small but stand to gain immensely. For example, investing a few thousand dollars in an early-stage project. If it fails, your loss is limited; if it succeeds, the returns could be astronomical (100x, 1000x).

• The idea sounds like this: Use small sums of money to leverage vast wealth and achieve class mobility.
• The real-world risk is this: For top investors, "asymmetric payoffs" are a portfolio concept. They invest in dozens or hundreds of such projects, fully aware that around 95% will likely go to zero. Their goal is to cover the losses from all the failures with the outsized returns of the successful 5% and ultimately make a profit.

Ordinary people often lack sufficient capital to build such a large, diversified portfolio that can withstand this risk. You might put all your "spare cash" into just 2 or 3 projects. If those happen to be among the failing 95%, it's not "limited loss" for you—it's "total loss."

Put bluntly: Naval and his peers play a probability game; they have plenty of bullets to fire. Ordinary folks often have only one or two bullets. Miss, and the game is over.

Risk #3: Decentralization = Freedom, But Also = "No Protections"

In the traditional financial world, we have regulators (like the SEC), deposit insurance, banks, and various laws protecting investors. It's imperfect, but at least there's a place to seek recourse.

• The idea sounds like this: Break free from constraints and freely participate in global, permissionless financial activities.
• The real-world risk is this: The decentralized world, like crypto and DeFi, resembles the Wild West. There's little to no regulation, or regulation lags severely. Your wallet gets hacked, your project pulls a rug pull, a smart contract gets exploited… your money could vanish forever, with no one accountable.

The price of freedom is that you bear 100% of the responsibility. For ordinary people lacking security knowledge and technical background, this landscape is riddled with traps.

Risk #4: Survivorship Bias – We See Naval, But Not the Others Who Fell

We're discussing Naval's philosophy largely because he himself achieved immense success with it. He's the general who returned alive from the battlefield.

• The idea sounds like this: If I emulate him, I can succeed too.
• The real-world risk is this: Thousands of people likely subscribed to similar philosophies over the past decade, actively engaging in angel investing and crypto investments. The vast majority failed and lost everything. But because they failed, you don't hear their voices.

The media and spotlight chase only the winners, creating an illusion that this path is feasible, even easy. In reality, it's a path with an extremely low success rate.

To Sum It Up

Naval's "decentralized investment philosophy" isn't a "scam." It's a high-risk, high-barrier-to-entry game requiring immense skill—an elite pursuit.

For us ordinary people, we cannot afford to see only its "decentralized," "high-return" appeal. We must soberly recognize the corresponding risks:

1. Skill Risk: Do you possess the analytical and judgment capabilities of a professional investor?
2. Capital Risk: Do you have enough "money you can afford to lose" to build a diversified portfolio that mitigates risk?
3. Security Risk: Do you have the expertise to protect your assets in this "Wild West"?
4. Psychological Risk: Can you accept the reality that 95% of your investments might go to zero?

My advice is to treat Naval's philosophy as a "mental model" for broadening your thinking—use it to spot asymmetric opportunities in life and work. But when it comes to investing real money, especially your hard-earned savings, exercise extreme caution. You might allocate a very small portion (say, no more than 1% of your total assets) to "experience" this world—but never bet the ranch.