Risk-taking isn't one of those things that's universally bad or universally good.
Thank you. Degenerate risk-taking is bad enough, but criminal when other people will suffer most of the consequences.
Good risks generally have limited downside. For example, R&D projects and startups that, if they fail commercially, only cost the money put into them, are good risks. Bad risks are generally those that have huge downside and low upside, that are taken because the consequences can be pushed off onto other people. An example of this would be eschewing a $500,000 safety device on an oil rig under a mile of ocean, thus admitting (realized, thanks to BP) risk of ecological catastrophe.
Corporations are notorious for externalizing costs but where they really shine is in the externalization of low-frequency, high-impact risks that most people can't evaluate. They're great at that.
I think that corporate executives often find themselves in a place where boredom gets the better of them. In dysfunctional companies, a well-studied executive can add value. The reward for this is moving on to a better job at a better company. Eventually, the executive ends up as the CEO of a great company like HP before some awful CEOs did it in. Problem: the company is running well and doesn't really need a CEO. People are already doing great work without direction. Result: CEO gets bored. I know a day trader who increased his profits by refusing to work between 10:30 and 3:00. He could find good trades in the first and last hour of the day, but "boredom trading" in the bland middle injected noise and didn't make any money for him. Most big-company executives are bored traders: making capricious decisions that just add noise, just to feel useful and fill time.
> Corporations are notorious for externalizing costs but where they really shine is in the externalization of low-frequency, high-impact risks that most people can't evaluate.
So true. This reminds me Feynman's investigation of the Challenger crush.
Thank you. Degenerate risk-taking is bad enough, but criminal when other people will suffer most of the consequences.
Good risks generally have limited downside. For example, R&D projects and startups that, if they fail commercially, only cost the money put into them, are good risks. Bad risks are generally those that have huge downside and low upside, that are taken because the consequences can be pushed off onto other people. An example of this would be eschewing a $500,000 safety device on an oil rig under a mile of ocean, thus admitting (realized, thanks to BP) risk of ecological catastrophe.
Corporations are notorious for externalizing costs but where they really shine is in the externalization of low-frequency, high-impact risks that most people can't evaluate. They're great at that.
I think that corporate executives often find themselves in a place where boredom gets the better of them. In dysfunctional companies, a well-studied executive can add value. The reward for this is moving on to a better job at a better company. Eventually, the executive ends up as the CEO of a great company like HP before some awful CEOs did it in. Problem: the company is running well and doesn't really need a CEO. People are already doing great work without direction. Result: CEO gets bored. I know a day trader who increased his profits by refusing to work between 10:30 and 3:00. He could find good trades in the first and last hour of the day, but "boredom trading" in the bland middle injected noise and didn't make any money for him. Most big-company executives are bored traders: making capricious decisions that just add noise, just to feel useful and fill time.