Due Diligence

principle

Due diligence pays when the best outcome is merely satisfactory but a bad choice leaves you with avoidable cost or annoyance. Save portfolio-style experimentation for bets with affordable failures and genuinely outsized upside.

A failed pair of jeans will never be redeemed by the next pair returning ten times your money. The upside is capped at owning jeans you actually wear; the downside is paying for discomfort and clutter.

Match the research to the payoff curve

The case for experimentation depends on asymmetric rewards. Under power-law-returns, one extraordinary success can repay many misses, making portfolio-thinking sensible when each attempt has a bounded-downside. An ordinary purchase has the opposite shape: success delivers limited utility, while failure still consumes money and creates annoyance. Researching durability and comfort therefore removes preventable losses rather than sacrificing meaningful upside.

Where it shows up

Jeans without a jackpot

Comparing durability and comfort before buying is rational because no exceptional payoff awaits the reckless shopper. The relevant question is not whether you can survive a bad purchase, but whether modest investigation can reduce its downside-risk.

Prudence is not a universal strategy

Due diligence loses its advantage when failures are cheap and a rare win can be disproportionately valuable. In that setting, exhaustive research may prevent the very experimentation that power-law-returns reward. The principle belongs where upside is capped and avoidable failure still matters.

Classify the payoff before you compare

Before tomorrow’s purchase, write down the best realistic outcome and the cost of getting it wrong. If the upside is merely “works well” while failure means wasted money or repeated irritation, investigate the two qualities most likely to determine use—such as durability and comfort—before committing.

Episodes that teach this

How to Think Like a VC and Embrace Failure in Day-to-Day Life 2,890 views
For jeans, there is no 10x return, so it makes sense to research durability and comfort and avoid buying something you will not wear.