The Voluntary Life: 99 Taking Risks With Money And Business

9 March 2013

99 Taking Risks With Money And Business

This episode discusses the question of risk in investment, speculation and entrepreneurship. When is it a good idea to take risk and when isn't it? I share my own personal opinion.

3 comments:

  1. I really enjoyed this podcast. Thank you so much Jake for taking the time to reflect more on this and share your thoughts on the subject. I agree with most of your insights, with your definition of speculation vs investing, striving to outperform the market vs striving for the average market returns. I also agree that speculation just like entrepreneurship takes a lot of energy and worry too. And I agree most people fail in speculation and would do better to invest their savings in a balanced way and focus on entrepreneurship as indeed your chances of success are much higher there. Many have made a fortune through entrepreneurship, only a few through speculation. I especially liked your advise that if you do decide to speculate it is wise to not engage in entrepreneurship as well as it is just too much risk and worry you will take onto yourself. That really helps me in deciding what to do with my life.

    A point where I disagree is that speculation gives you less control than entrepreneurship (over the end result, making money or not) and that speculation adds less value to the world and oneself as entrepreneurship. The control a speculator has is just on a different level as the entrepreneur has. The entrepreneur has a lot of control to build a great company but has no control whatsoever whether his company will actually be valued. Even when the entrepreneur is growing at exponential rates, even if he is paying great dividends, even if he piled up tons of cash reserves, even when he did everything right, he is still completely dependent on speculators whether his company will be valued or not.

    The entrepreneur needs the speculator as much as the speculator needs the entrepreneur. Therefore the speculator is doing as much good for society as an entrepreneur. One creates value, the other one values. If the speculator does his job well, he will have helped valuing/buying something that was undervalued (what society needs more of), channeling resources to those who deserve them, need them and should grow. If he does his job poorly he will have helped valuing/buying something that was overvalued (what society needs less of), channeling resources to those (assets) who do not deserve them, and should shrink. He will lose all his money, just like the entrepreneur who offers a service or product that is not needed by society.

    The control a speculator has is on a different level than the entrepreneur. Though he cannot control the entrepreneur his actions. He certainly can control what he values and what not.

    Always interested to hear your thoughts. You motivate me in thinking more about it. Otherwise thank you very much for again a great podcast :)

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