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> Most people have an aversion to risk, my college economics professor told me. Which means they have to be rewarded to take on that risk. The higher the risk,
by andre3k1 16y ago
> Most people have an aversion to risk, my college economics professor told me. Which means they have to be rewarded to take on that risk. The higher the risk, the higher the possible payout has to be for people to jump.
Here's a followup question your freshman econ professor would have asked:
> Should we create incentives to reward entrepreneurs for their risk aversion? Or should we leave it exclusively up to the free markets to offer the reward?
In other words, if an idea fails should society step in and help the entrepreneur out (thus creating an incentive for him to further innovate)?
- lunaru 16y agoSorry, but society shouldn't have to bail out a failed social network for puppies. For entrepreneurship there is already enough reward for the risk. It's not just monetary gains we're talking about. For one, you get to call the shots and that's worth more to some people than money. (http://www.paulgraham.com/boss.html http://www.paulgraham.com/boss.html)
- edanm 16y ago"For entrepreneurship there is already enough reward for the risk." Maybe that's true now, but it isn't a tautology. For example, pg has mentioned that a few centuries ago, people didn't keep the wealth they made (it was handed over to royalty), which made it so there were no incentives, which severely lowered entrepreneurship. Society has to work at making sure the balance of incentives is "correct" (correct in the sense that that's what that society wants.) So asking about one potential way society can help increase risk-taking is perfectly valid and reasonable.