3 ms·
You're taking a huge risk not working for Cisco, Oracle, Google No, this is not risk. This is opportunity cost. When referring to finance or economics, risk
by CalChris 10y ago
You're taking a huge risk not working for Cisco, Oracle, Google
No, this is not risk. This is opportunity cost.
When referring to finance or economics, risk describes
the possibility that an investment's actual and projected
returns are different and that some or all of the
principle is lost as a result. Opportunity cost concerns
the possibility that the returns of a chosen investment
are lower than the returns of a necessarily forgone
investment.
http://www.investopedia.com/ask/answers/041015/what-difference-between-risk-and-opportunity-cost.asp http://www.investopedia.com/ask/answers/041015/what-differen...
A VC can lose their cash money investment in StartUpCo. That's risk. An engineer choosing between StartUpCo and Cisco faces a choice between two opportunities. The cost of choosing one opportunity is the other. That's an opportunity cost.
- module0000 10y agoGood point, opportunity cost describes it perfectly.
- barrkel 10y agoI think you're being pedantic. Let me explain why. Given a choice between two alternatives, one with high variance and low median return, and another with low variance and high median return, it is perfectly sensible to use the English language (as opposed to investment jargon) term 'riskier' to describe the first alternative, if maximizing return is the goal.
- morgante 10y agoSure, and if my opportunity costs exceed your offer then I won't work for you. BATNA is what drives compensation, and the risk of you ceasing operations definitely factors into that.
- shostack 10y agoThe risk comes in from the fact that a startup has a decent chance of flaming out and ceasing exist in less than a year in which case you are out of a job. While you could still lose your job at a big company, they are generally more stable with billions in the bank.