> But why does a position with greater risk necessitate greater compensation? There are various methods to address risk: 1. Avoid the risk 2. Reduce the risk

> But why does a position with greater risk necessitate greater compensation? There are various methods to address risk: 1. Avoid the risk 2. Reduce the risk 3. Transfer the risk 4. Accept the risk When you buy insurance, you're doing #3. If you self-insure, you're doing #4. Either strategy requires putting some money towards premiums, the expected possible cost of the risk. It's much cheaper to pursue #1 or #2. You're then saving an amount exactly equal to the premiums don't have to pay under #3 or #4. Thus, you can pay a person to do #1/#2 a fraction of the equivalent cost of #3/#4 and still come out ahead. > A lazy manager can get along by just regularly pruning reports who produce more liability than reward. Yup, and the books will balance.