This essay becomes more fun -- and more useful -- if we apply OP's standards to other areas of trust and risk. For example:<p>- Are there no absolute red flags in online dating? (Some ex-convicts with teardrop tattoos may be fully reformed.)<p>- Are there no absolute red flags in getting into a taxi (Some angry drivers with alcohol on their breath may be capable of getting to the destination.)<p>In such situations, the thought experiment fails. Wrong decisions can be catastrophic or fatal. Past a certain point, we don't roll the dice, even if good outcomes are possible, too. And we cringe when others knowingly take those risks.<p>OP's argument probably works best for Y Combinator, where the financial risk per deal is small and fully bounded. (The portfolio is vast; there's no implicit commitment to fund any deal beyond $500k, and everything is so early stage that the worst investments will likely fail quietly. They won't become the reputation-ruining messes of expose journalism, indictments, etc. that will impair your ability to stay in the venture business.)<p>For larger VC firms, particularly ones that get most of their capital from scandal-wary limited partners at universities or state retirement orgs, it's a different story. Extreme investment outcomes (good or bad) define your reputation in ways that can last for many years. Even a single deal's red-flag implosion can hurt your credibility far longer than you'd like.<p>So, bravo to OP for working at a firm where periodic red flags can be safely ignored. Do be careful in your choice of taxi drivers or online dates.