One of the most effective world hacks I have ever discovered is the black swan idea. This phenomenon was named because in the past, people assumed black swans were impossible because all the swans they had ever seen were white. As a world hack, the idea can be restated as follows: If you want to accomplish something extraordinary, use techniques that haven't occurred in a long time. Better yet, use techniques that have never been observed. The 911 attacks were a prime example of a black swan world hack. Never seen before, and huge impact.
From a financial perspective, a black swan offers an extra added feature. People grossly underpay for insurance against black swans. So, the world hack is to buy the insurance policies. If you are aware of option trading, this means buying way out of the money calls and puts.
This world hack has its own set of helpers. I think I will talk about memes in more detail tomorrow, so I'll just summarize them here: A meme is an idea that replicates itself. The black swan world hack takes advantage of the opposite meme: "look how much money we are making every month from people making bets that never pay off!" It is true, it is very short-term profitable to collect insurance premiums from events that never happen. It is extremely profitable in the long-term to buy insurance premiums for events that almost never happen.
It sounds confusing, right? The difference is in the size of the bets and the payoffs. The world hack of betting on black swans is very cheap, and very rarely profitable, but the payoffs are huge. Betting against a black swan is very expensive, almost always profitable, and the payoffs are small. Think of it like a life insurance policy: The more customers you have giving you money, the more money you must have ready in case all of them die. When you have more customers, they die more often.
More to come with this world hack later this week.