6 ms·

Higher returns are usually associated with risks and imho. one of the main reasons we have limited social mobility is the inability of poor people to take risks

Higher returns are usually associated with risks and imho. one of the main reasons we have limited social mobility is the inability of poor people to take risks and people born into money taking risks.

nicbou 5y ago
Yep. I've worked a lot as a teenager, and amassed a modest sum. It allowed me to take a lot of risks, even after I moved out. It allowed me to go freelance and wait a long time to get paid. It allowed me not to work in university. It allowed me to easily relocate to another country. A decade later, this cushion has compounded many times and funded many more risks that paid off. Without those savings, I would have taken many more conservative decisions that would have left me in a very different situation.
mupuff1234 5y ago
The thing to note is that for rich people there is very minimal risk since they usually have a safety net to fall back on.
- indymike 5y ago
  This is a paradox. Taking risks is derisked by wealth.
  - maximus-decimus 5y ago
    A better way to phrase it is you have the same risk of failure, but somebody who's rich can afford to fail.
  - dharmaturtle 5y ago
    The word "risk" is overloaded: https://www.optimizedportfolio.com/risk/ https://www.optimizedportfolio.com/risk/ There's risk as measured by volatility. This is exemplified by the stock market - it's highly volatile, but has a higher expected return than the bond market. People who can't afford the risk of the stock market (because it's too volatile) put their money into the bond market, which has less expected returns. There's risk of not meeting your retirement goals. There's risk of unemployment. There's risk of permanent loss of investment. There's risk that you can hedge with insurance. > rich people there is very minimal risk since they usually have a safety net to fall back on. Rich people have minimal _overall_ risk because they can afford to take large risky bets with positive expected return. This is because they have so much capital they can afford to take these bets over and over until the reward arrives (Kelly criterion). Poor people can't afford the risk, and therefore have to do things like pay for more insurance coverage, pay for extra warranty, or have a (relatively) large emergency fund.
    - anamax 5y ago
      An example helps. Suppose that you're offered an opportunity to bet $10 with a 90% chance of $0 return and 10% chance of $1,000. That's a good bet, especially if you can keep making it. Put $100 at risk and you've got a reasonable chance of ending up with $1000. Now let's multiply all of the dollars by 1,000. The numbers still work, but how many people can afford to put $100k into 10 bets? There are far more people who can afford to lose $10 than there are people who can afford to lose $10k.
      - landemva 5y ago
        This can be applied to buying several good defi project coins, at smaller entry amounts. Investing at smaller amounts is becoming available to those who can not qualify for SEC accredited investor status.
- scarface74 5y ago
  There is a reason that most people who go into relatively low paying prestigious jobs like journalism come from affluent backgrounds.
Comevius 5y ago
To get somewhere you have to be able to take risks, gather quality feedback (feedback tethered to reality) and create knowledge out of it. For the poor there are scarcely any opportunities, because they can't afford to take risks. For the rich however there are less opportunities to learn from mistakes, because of the lack of consequences. This is why the middle class is important, the lower class is usually pinned down by reality, and the upper class is hardly affected by it. Neither is a healthy relationship with reality.
- kurupt213 5y ago
  I disagree. People with nothing to lose are risking the least. Poor people can most afford to take risks.
  - nicbou 5y ago
    When you run out of money you risk your own health. You are still gambling the roof over your head and the certainty of your next meal. That's a lot more to risk than a few months of savings.
- AussieWog93 5y ago
  >For the rich however there are less opportunities to learn from mistakes, because of the lack of consequences. Citation needed there. Even though it's not as bad as homelessness, I can't imagine it being easy to tell your rich, successful parents that their child is a fuckup.
  - scarface74 5y ago
    My parents aren’t “rich” - my mom is a retired school teacher and dad a retired factory worker. They retired at 55 and 57 respectively. They now in their late 70s. But they have helped me get over a lot of fuckups. - a wrecked sports car because of carelessness when I was young with more dollars than sense. - they never complained about me being a graduate school dropout. - a dumb first marriage and a financially draining divorce - a side real estate business that ended around 2010 (do I need to explain?) This was all before I turned 35. I got better. I would have been in far worse shape if it weren’t for them.

nicbou 5y ago

Yep. I've worked a lot as a teenager, and amassed a modest sum. It allowed me to take a lot of risks, even after I moved out. It allowed me to go freelance and wait a long time to get paid. It allowed me not to work in university. It allowed me to easily relocate to another country. A decade later, this cushion has compounded many times and funded many more risks that paid off. Without those savings, I would have taken many more conservative decisions that would have left me in a very different situation.

mupuff1234 5y ago

The thing to note is that for rich people there is very minimal risk since they usually have a safety net to fall back on.

indymike 5y ago
This is a paradox. Taking risks is derisked by wealth.
- maximus-decimus 5y ago
  A better way to phrase it is you have the same risk of failure, but somebody who's rich can afford to fail.
- dharmaturtle 5y ago
  The word "risk" is overloaded: https://www.optimizedportfolio.com/risk/ https://www.optimizedportfolio.com/risk/ There's risk as measured by volatility. This is exemplified by the stock market - it's highly volatile, but has a higher expected return than the bond market. People who can't afford the risk of the stock market (because it's too volatile) put their money into the bond market, which has less expected returns. There's risk of not meeting your retirement goals. There's risk of unemployment. There's risk of permanent loss of investment. There's risk that you can hedge with insurance. > rich people there is very minimal risk since they usually have a safety net to fall back on. Rich people have minimal _overall_ risk because they can afford to take large risky bets with positive expected return. This is because they have so much capital they can afford to take these bets over and over until the reward arrives (Kelly criterion). Poor people can't afford the risk, and therefore have to do things like pay for more insurance coverage, pay for extra warranty, or have a (relatively) large emergency fund.
  - anamax 5y ago
    An example helps. Suppose that you're offered an opportunity to bet $10 with a 90% chance of $0 return and 10% chance of $1,000. That's a good bet, especially if you can keep making it. Put $100 at risk and you've got a reasonable chance of ending up with $1000. Now let's multiply all of the dollars by 1,000. The numbers still work, but how many people can afford to put $100k into 10 bets? There are far more people who can afford to lose $10 than there are people who can afford to lose $10k.
    - landemva 5y ago
      This can be applied to buying several good defi project coins, at smaller entry amounts. Investing at smaller amounts is becoming available to those who can not qualify for SEC accredited investor status.
scarface74 5y ago
There is a reason that most people who go into relatively low paying prestigious jobs like journalism come from affluent backgrounds.

Comevius 5y ago

To get somewhere you have to be able to take risks, gather quality feedback (feedback tethered to reality) and create knowledge out of it. For the poor there are scarcely any opportunities, because they can't afford to take risks. For the rich however there are less opportunities to learn from mistakes, because of the lack of consequences. This is why the middle class is important, the lower class is usually pinned down by reality, and the upper class is hardly affected by it. Neither is a healthy relationship with reality.

kurupt213 5y ago
I disagree. People with nothing to lose are risking the least. Poor people can most afford to take risks.
- nicbou 5y ago
  When you run out of money you risk your own health. You are still gambling the roof over your head and the certainty of your next meal. That's a lot more to risk than a few months of savings.
AussieWog93 5y ago
>For the rich however there are less opportunities to learn from mistakes, because of the lack of consequences. Citation needed there. Even though it's not as bad as homelessness, I can't imagine it being easy to tell your rich, successful parents that their child is a fuckup.
- scarface74 5y ago
  My parents aren’t “rich” - my mom is a retired school teacher and dad a retired factory worker. They retired at 55 and 57 respectively. They now in their late 70s. But they have helped me get over a lot of fuckups. - a wrecked sports car because of carelessness when I was young with more dollars than sense. - they never complained about me being a graduate school dropout. - a dumb first marriage and a financially draining divorce - a side real estate business that ended around 2010 (do I need to explain?) This was all before I turned 35. I got better. I would have been in far worse shape if it weren’t for them.