Wednesday, July 30, 2008

Risk


This is a re-post from waaaay back in ought five. Still valid though.
Spent a week in Toronto. Yet again, I have been amazed at the courtesy of Toronto drivers. Maybe Darwin was right...all the stupid ones have died off. What they DONT do is let you dawdle along doing the speed limit without tail gating you. Some of the unsafe passing was a little un-nerving.
I was working out our future business with my wife now that the Ren Fest has closed, and we were wondering if we should put time or money into one of the alternative proposals. "I dunno" she said "I'm not sure I want to risk whatever we could mortage...twenty or thirty thousand or so... on a business venture. Just at that moment, a Passant passes up at 90 klicks on a double solid line. A little startled, I checked my dashboard...yup, its a 60 zone and I am already doing 70. "Hmmmm" said I, "that fellow who just passed us is risking at least that much in his nice new car, risking the rest of his life, and risking damage to any on-coming car which might be coming over the hill at us. And for a payoff?
She looked at me....."so what is the connection?" "There are lots of people taking risk every day....huge risks, like that guy. Risk is part of life...no pain no gain....and of course risk can be evaluated. It helps if you don't think about it too closely." That guy is risking everything just for the hell of it.
My daddy used to tell me that you should never gamble more than you can afford to lose. He played crown and anchor, but never passed on a solid line. Like he said, don't gamble more than you are prepared to lose...and if you are going to do stupid things on the highway, or ride on "those" tires, or put off getting the new brake pads, you are not only gambling, but gambling stupidly because there is no payoff.
So what did we decide about our business venture....well for one thing, we decided that we had no control on the variables. We didn't own the show, didn't know how much the insurance would be, didn't know how much most of the expenses were. On the other hand, we had a fair idea of how much we could earn at the show. We have NO IDEA if earnings will exceed expenses. So investing in this show is like crossing on a double solid....we don't know what is coming over the hill at us. Obviously, most of these questions could be answered. For sure, we would earn SOMETHING....but will it be worth the losses?. The last question was...how much can we afford to lose on a gamble. JP Morgan once showed a broker the door when he said "well, this mining venture right here looks like a good gamble". Mr. Morgan replied..."I never gamble" and fired the broker. On the other hand...the broker went on to buy the mine, and made millions, and all his life regretted using the term "gambling" to describe a business venture. I think this venture is looking too much like a gamble. (And in fact, two years later, we feel that we made the right decision to pass on it.)
This whole line of thought came to me when I read a story in the Winnipeg Sun about road rage,http://www.canoe.ca/NewsStand/WinnipegSun/News/2005/05/09/1031641-sun.htmland it recalled to me our conversation as we were driving. This is kind of funny actually, though of course the results were a little tragic.
Four seventeen year olds out for a drive, were in the drive through at MacDonalds, and for some stupid seventeen year old reason, threw candy at one of the other cars. The other car contained some "baaad dudes" who chased them down, trashed their car with a chain, beat them up and stole their wallets. A most interesting lesson in "consequences". They gambled and lost. They COULD have lost a lot more. Some would say, They weren't gambling at all, they were just being kids. Well, they participated in the high speed chase (that was a gamble that they could get away)....they provoked the conflict (gambling that what they did would have no consequences).....I think it was a pretty cheap lesson all in all.

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