The cruelest aesthetics in financial markets is to lift a person onto a pedestal, then pull the pedestal away before their eyes. Twenty years in finance, the more I see, the clearer one thing: those who bet on a single instrument often lose not to the market, but to their own stubborn refusal to admit error.
The 2017 "Bitcoin fork war" is one I often use as a specimen.
Back then Wu Jihan, with the miner camp (the BCH faction), went at it with the Core dev team (the BTC faction). The fuse was tiny: whether to increase the block size. Yet both sides deployed hundreds of millions in computing power, capital, and public opinion, launching computing-power attacks on each other, mutually draining each other's network blood.
🔑 1. Why do people easily obsess over a single instrument?
Many, after making big money in one track — real estate, China-concept stocks, a certain stock, a certain coin — easily mistake "phase-dividend" for "I've seen through the truth."
So they stake 90%+ of their net worth on one instrument long-term.
This isn't isolated. In behavioral finance it has three names:
- Overconfidence: a few correct calls, and a person takes luck for skill;
- Sunk-cost fallacy: the deeper the hole, the harder to admit the direction was wrong;
- Narrative dependence: people need a "story" to soothe anxiety, and a single instrument often carries its own moving narrative — "world-changing tech," "core assets always rise."
When the story overrides the data, judgment starts to distort.
🌏 2. Three fatal risks of a single instrument
The black swan can't be predicted.
However perfect a business model, three external forces can zero it with one click: one policy adjustment rewrites an entire industry's valuation base; one technology iteration replaces the heavily-held "underlying tech" in three years; one geopolitical conflict — cross-border assets fear most a jurisdiction's sudden relationship shift.
The 2022 crypto winter: LUNA and FTX, each from tens of billions in market cap to zero within days. Those holding before believed "it won't fall." The fact: no single instrument is immune to black swans.
Liquidity can dry up instantly.
Once the up-cycle ends, the single asset often hits not "price drop" first, but "can't sell even wanting to."
Recent non-core-area property is a live sample: the list price still there, no buyer for half a year, real liquidation only at a deep discount. Stocks hitting limit-down, after bond credit events, during private-fund lock-up — all the same: book numbers aren't spendable money.
The psychology falls into escalation of commitment.
This is the most fatal internal cause. The more you lose, the more you add; the more you add, the more you lose; finally locking the whole family's liquidity into an illiquid instrument. Behavioral finance calls it "escalation of commitment" — to prove past decisions were right, a person keeps doubling down on a wrong one.
⚖️ 3. The solution: allocation over selection
True wealth-preservers never develop faith in any single instrument.
The purpose of asset allocation isn't to predict "which will rise most," but to ensure: no matter which instrument gets hit, the family's overall survival is unaffected.
Behind it is a plain probability: the probability of a single instrument going to zero is P; diversifying across five low-correlation instruments, the probability of all five zeroing simultaneously is roughly P to the fifth power, approaching zero.
We needn't be right every time. We only need to not be killed by any single mistake.
This is exactly the foundation of Taleb's "barbell strategy": put most resources on extremely safe "constants," keep a little where opportunities can be caught, never gamble the fortune in the middle.
🏛️ 4. Three actionable conclusions
- Cap any single instrument: any one instrument (even your most favored stock, that property), as a share of the family's investable assets, recommend not exceeding 20%–30%.
- Ask periodically: if it went to zero tomorrow, would life change? If yes, you've bet too much.
- Use allocation instead of prediction: spend less time guessing rises and falls, more time building structure. With structure right, volatility is just noise.
Build the structure right, and when the wind and waves come, it's only a slight sway.
Next, lift a corner of the fund industry's fig leaf: the hidden rules of harvesting. Why do many wealth products often not make money?