The 7 Sins of Investing - Number 2: Investing in Moonshots
In the golden age of meme stocks, miracle drugs, and moon-bound rockets, it’s never been easier to imagine your portfolio blasting off like SpaceX. But for most investors, chasing the next big thing ends not in the stars—but in the dust.
For us it is it the second sin of investing: speculation disguised as strategy.
Whether it’s a biotech with one unproven molecule or a pre-revenue EV startup with a slick deck and zero deliveries, the allure is the same: a life-changing return, a ticket out of mediocrity, a chance to say I told you so at the next dinner party. But the graveyard of investing is littered with companies that promised the moon and delivered a crater.
Just ask those who bought Theranos. Or Nikola. Or the SPAC-of-the-month club.
The Problem With “If It Works…”
Moonshots, by their very nature, are wagers on extraordinary outcomes—bets that something currently improbable will eventually become inevitable. If the technology works flawlessly, if the drug receives regulatory approval, if the market emerges and scales as hoped, then the returns can indeed be spectacular. But that’s a long chain of “ifs,” each one a potential point of failure. It’s not just one gamble—it’s a stack of them.
This kind of thinking seduces investors with the promise of asymmetry: limited downside, unlimited upside. But in reality, the downside is often underestimated—both in terms of capital lost and time wasted. And the upside? It’s usually far less attainable than the slide decks suggest. Many of these companies don’t have functioning products, proven business models, or even a clear path to profitability.
Yet investors too often treat these bets with a kind of casual optimism, as though they were playing with Monopoly money. They blur the line between high risk—where probabilities can at least be estimated—and deep uncertainty, where the very parameters of success are unknown. In the absence of fundamentals, people cling to narratives, hype, and hope.
Hope Is Not a Strategy
A disciplined investor starts with facts, not fantasies. Competitive moats, cash flows, pricing power—these are the quiet engines of wealth creation. They rarely trend on Reddit. They never promise 10x in a week. But they build compounding machines that outperform over time.
And when one moonshot turns sour, the temptation is to double down on the next. That’s not strategy—that’s a gambling pattern.
Beyond the capital loss, there’s another tax: attention. Investors chasing moonshots often neglect their core holdings. They burn time on forums, cling to rumors, and become emotionally entangled with companies they don’t understand.
Meanwhile, great compounders—think Thermo Fisher, S&P Global, or Costco—keep delivering quietly, quarter after quarter.
The Temptation Will Return
Of course, moonshots will never disappear. There will always be the next hot space company, cancer cure, or crypto protocol promising to reshape the world. Some of them might succeed. Most won’t.
But the winners that truly change the world—Amazon, Nvidia, Apple—rarely looked like moonshots at the start. They were businesses with product-market fit, growing revenues, and leaders who knew how to execute. They weren’t lottery tickets. They were businesses.
The Verdict
Speculating isn’t evil—but confusing it with investing is. As part of a diversified portfolio, one or two measured bets on early-stage innovation can be justified. But putting a meaningful share of your wealth into companies with no revenue, no moat, and no path to profitability? That’s not bold. That’s reckless.
The market rewards patience, discipline, and rationality. Moonshots reward luck. And luck, as we all know, is not a repeatable edge.
So the next time someone tells you about a “once-in-a-generation” opportunity, remember: the surest way to compound wealth is to avoid blowing up.
Not every rocket needs your fuel.
This is part 2 in our series: "The 7 Sins of Investing." Also read:
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