Doing Research Is a Bigger Gamble Than Venture Capital

Doing research is gambling. In fact, for people without money, research is gambling, and so is everything else.

Author: Koutian Wu; GitHub: ktwu01

Venture capital is gambling, but research is more of a gamble. A VC can invest in many companies. A fund backs dozens, most of them fail, and that is fine as long as one or two work. Investing widely lowers sigma and raises the Sharpe ratio. Research is limited by your energy. How many projects can one person do in a lifetime? A few years of PhD, a few years of postdoc, and you have bet on a handful of directions. If you pick the wrong one, or the field suddenly cools, you cannot diversify.

When a VC loses, it loses money and can raise another fund. When you lose at research, you lose time, the most valuable years between your mid twenties and mid thirties.

Take it one step further. Any job can be broken down into a base salary plus a gambling component.

The base salary is what you reliably take home. The gamble is what you hope for and may not get, equity, bonuses, promotions, whether a project ever produces results.

Most companies pay a thin base salary with a large gambling component, and the gamble cannot pay off very much either. They give you enough base pay to survive and then draw you a picture of the pie.

Research pushes that structure to the extreme. Low base pay, a big gamble, a modest payoff even if you win, and a chain of bets where every step can go wrong.

So my view is this. If your family’s total assets are under 1M USD in the US, or under 10M CNY in China, being a scientist is basically nothing. That holds in most regions of the world.

I know that sounds harsh. I am not saying research is bad, or that people without money do not deserve ideals. I am saying this game needs time, patience and room for error, and all of that needs capital behind it. People whose families can catch them have a way back if they lose. People whose families cannot are going all in.

If your family cannot catch you, you need to be clearer eyed than everyone else and better at doing the math. Work out whether the base salary is enough and whether the odds on the gamble are fair, then decide whether to sit down at the table.