# One Last Attempt At Understanding \[investment\] Risk
**URL:** https://boards.straightdope.com/t/one-last-attempt-at-understanding-investment-risk/577711
**Category:** Great Debates
**Created:** [April 8, 2011, 8:12pm UTC](https://boards.straightdope.com/t/one-last-attempt-at-understanding-investment-risk/577711 "2011-04-08T20:12:36Z")
**Posts on this page:** 20
**Page:** 2
### Author:  [@emacknight](https://boards.straightdope.com/u/emacknight)
#### Post date: [April 9, 2011, 2:14am UTC](https://boards.straightdope.com/t/one-last-attempt-at-understanding-investment-risk/577711/21 "2011-04-09T02:14:41Z")
> [@Xema](#):
>
> The OP seems to imply that all terms of his agreement with Johny have been met. If so, he has no valid moral or legal grievance.
>
> It’s easy to imagine that he thought the condo rental was a good deal and hoped it would continue indefinitely. Life often fails to work out as people hope, and such failure does not create any sort of entitlement.
I agree. But what I don’t understand is why it’s different for the dishwasher in the same scenario ([here](http://boards.straightdope.com/sdmb/showthread.php?t=602417))?
Why were people to quick to run in and defend the dishwasher, implying he deserved a larger share of the pie? Why did it matter so much what previous wealth the owner had when making his investment and putting his equity at risk?
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### Author:  [@Magiver](https://boards.straightdope.com/u/Magiver)
#### Post date: [April 9, 2011, 2:57am UTC](https://boards.straightdope.com/t/one-last-attempt-at-understanding-investment-risk/577711/22 "2011-04-09T02:57:44Z")
> [@emacknight](#):
>
> He’s risked nothing?
>
> Now he’s out on the street with no where to live!
He’s not out on the street. He has to move to a different place.
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### Author:  [@emacknight](https://boards.straightdope.com/u/emacknight)
#### Post date: [April 9, 2011, 5:22am UTC](https://boards.straightdope.com/t/one-last-attempt-at-understanding-investment-risk/577711/23 "2011-04-09T05:22:59Z")
> [@Magiver](#):
>
> He’s not out on the street. He has to move to a different place.
What if he can’t afford another place? What if the market is tight and nothing is available?
ETA Why was it okay to say these things about a dishwasher, but not about a tenant?
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### Author:  [@Magiver](https://boards.straightdope.com/u/Magiver)
#### Post date: [April 9, 2011, 5:39am UTC](https://boards.straightdope.com/t/one-last-attempt-at-understanding-investment-risk/577711/24 "2011-04-09T05:39:38Z")
> [@emacknight](#):
>
> What if he can’t afford another place? What if the market is tight and nothing is available?
it’s not the owner’s responsibility to house anyone.
> [@emacknight](#):
>
> ETA Why was it okay to say these things about a dishwasher, but not about a tenant?
I don’t understand your dishwasher question at all.
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### Author:  [@Bosstone](https://boards.straightdope.com/u/Bosstone)
#### Post date: [April 9, 2011, 5:42am UTC](https://boards.straightdope.com/t/one-last-attempt-at-understanding-investment-risk/577711/25 "2011-04-09T05:42:53Z")
> [@Magiver](#):
>
> I don’t understand your dishwasher question at all.
[Have fun.](http://boards.straightdope.com/sdmb/showthread.php?t=602417)
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### Author:  [@Magiver](https://boards.straightdope.com/u/Magiver)
#### Post date: [April 9, 2011, 5:57am UTC](https://boards.straightdope.com/t/one-last-attempt-at-understanding-investment-risk/577711/26 "2011-04-09T05:57:54Z")
> [@Bosstone](#):
>
> [Have fun.](http://boards.straightdope.com/sdmb/showthread.php?t=602417)
Question answered.
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### Author:  [@emacknight](https://boards.straightdope.com/u/emacknight)
#### Post date: [April 9, 2011, 4:46pm UTC](https://boards.straightdope.com/t/one-last-attempt-at-understanding-investment-risk/577711/27 "2011-04-09T16:46:20Z")
> [@Bosstone](#):
>
> [Have fun.](http://boards.straightdope.com/sdmb/showthread.php?t=602417)
So two nearly identical situations. In one the owner risks equity in the form of real estate. The other the same guy invests $100k in a restaurant. Timmy is as instrumental to Johny’s success as the dishwasher is. Without Timmy Johny would have lost $12,000.
After a year, profits/losses are realized. And in this case it seems clear cut, the owner gets the profits, the tenant is out on the street. In the other case, there was a huge moral gray area where the dishwasher was [morally] entitled to more than his salary.
The same arguments could have played out here. Evil land owner should have lowered the rent as the home value increased, should have allowed profit sharing to encourage signing a longer lease.
What am I missing? Is the moral imperative to create a job higher than the moral imperative to provide affordable housing?
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### Author:  [@Snnipe\_70E](https://boards.straightdope.com/u/Snnipe_70E)
#### Post date: [April 9, 2011, 5:37pm UTC](https://boards.straightdope.com/t/one-last-attempt-at-understanding-investment-risk/577711/28 "2011-04-09T17:37:46Z")
> [@emacknight](#):
>
> So two nearly identical situations. In one the owner risks equity in the form of real estate. The other the same guy invests $100k in a restaurant. Timmy is as instrumental to Johny’s success as the dishwasher is. Without Timmy Johny would have lost $12,000.
>
> After a year, profits/losses are realized. And in this case it seems clear cut, the owner gets the profits, the tenant is out on the street. In the other case, there was a huge moral gray area where the dishwasher was [morally] entitled to more than his salary.
>
> The same arguments could have played out here. Evil land owner should have lowered the rent as the home value increased, should have allowed profit sharing to encourage signing a longer lease.
>
> What am I missing? Is the moral imperative to create a job higher than the moral imperative to provide affordable housing?
In the first case it is 0 and 0.
Timmy risk little and had a place to live for a year, now he has to go to the trouble to move to a new location. He could have risked more and moved into a location that had a stable owner, but probably paid more rent.
I am in a situation some what like the dishwasher. The high rise building I work at is owned by a company that buys older buildings, cleans and fixes them up then normally sells them with in 5 years.
When the building sells it will affect my job. The new owner may keep the existing crew and nothing changes for me. They can bring in current employees of the new owner and lay some or all of the existing building’s employees off. they can reduce the size of the crew. Or they could just say we are paid to much and hire a completely new crew off the street.
My risk was leaving a solid job, for a job that cold end someday. A job that I had to drive for an hour each way to. My gas bill was $600 a month. That was my risk. I took a job that my wife drives me to in 15 minutes, so no commute expences.
I want my employeer to be sucessfull. If they sell and make a profit and I get laid off what am I owed. Just a proper notice that I need to look for a new job.
What is Timmy owed notice that he needs to look for a new place to live.
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### Author:  [@MOIDALIZE](https://boards.straightdope.com/u/MOIDALIZE)
#### Post date: [April 9, 2011, 5:51pm UTC](https://boards.straightdope.com/t/one-last-attempt-at-understanding-investment-risk/577711/29 "2011-04-09T17:51:56Z")
> [@emacknight](#):
>
> When I asked the same question involving a restaurant, the relative wealth of the owner vs the dishwasher was the most important variable. I find it strange that isn’t a factor this time.
I didn’t read through that other thread, but you’ve made the distinction in this thread of concentrating on investment risk. The other thread didn’t make that distinction, yet you focused on the investment risk over any other kind of risk.
There’s nothing wrong with defining risk in terms of the money one puts up in search of a higher return, but that’s not the only kind of risk. Time has a value all its own (as one example). In this thread, you’ve narrowed the type of risk you wanted to talk about, and I’m not seeing much disagreement with your OP.
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### Author:  [@emacknight](https://boards.straightdope.com/u/emacknight)
#### Post date: [April 9, 2011, 6:57pm UTC](https://boards.straightdope.com/t/one-last-attempt-at-understanding-investment-risk/577711/30 "2011-04-09T18:57:21Z")
> [@MOIDALIZE](#):
>
> I didn’t read through that other thread, but you’ve made the distinction in this thread of concentrating on investment risk. The other thread didn’t make that distinction, yet you focused on the investment risk over any other kind of risk.
>
> There’s nothing wrong with defining risk in terms of the money one puts up in search of a higher return, but that’s not the only kind of risk. Time has a value all its own (as one example). In this thread, you’ve narrowed the type of risk you wanted to talk about, and I’m not seeing much disagreement with your OP.
Right, but in the other thread it didn’t take people long to diminish the owner’s \*investment \*risk, emphasize the dishwasher’s \*personal \*risk, and then rationalize a justification for the dishwasher \*deserving \*more. _He risked losing a job. Without his job he can’t feed his family and loses his home._
The relationship between the dishwasher and owner is the same as the relationship between the tenant and the owner. All the risk the dishwasher takes are the same as the tenant.
Granted, none of this justifies the landlord being a dick.
But what I love most is that the other thread devolved into a discussion about the 2008 mortgage crisis, in which people getting foreclosed on where the victims (hence scenario 2). In this example though, we’re all okay letting Johny take the loss.
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### Author:  [@MOIDALIZE](https://boards.straightdope.com/u/MOIDALIZE)
#### Post date: [April 9, 2011, 7:05pm UTC](https://boards.straightdope.com/t/one-last-attempt-at-understanding-investment-risk/577711/31 "2011-04-09T19:05:40Z")
> [@emacknight](#):
>
> The relationship between the dishwasher and owner is the same as the relationship between the tenant and the owner. All the risk the dishwasher takes are the same as the tenant.
Sure, but only in terms of investment risk. The restaurant owner invested money in a business in hopes of a profit. The real estate investor invested money in a house in hopes of selling it for a profit. The dishwasher and tenant in both cases made no such investment.
But that’s not the only kind of risk that exists, and some people are of the opinion that certain types of risk outweigh those risks defined solely in monetary terms. As I said, there’s nothing wrong with defining risk by the amount of money that’s at stake, but risking money isn’t inherently of more importance than risking other things. It’s a question of what you value.
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### Author:  [@Frylock](https://boards.straightdope.com/u/Frylock)
#### Post date: [April 9, 2011, 7:17pm UTC](https://boards.straightdope.com/t/one-last-attempt-at-understanding-investment-risk/577711/32 "2011-04-09T19:17:21Z")
**emacknight** , it’s a mistake to think you’re helping anyone “understand risk,” rather, what you’re doing is making an argument as to what you think we should _do_ concerning risk.
We all know what risk is. We all know what you mean when you talk about risk. What makes you think otherwise?
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### Author:  [@Frylock](https://boards.straightdope.com/u/Frylock)
#### Post date: [April 9, 2011, 7:19pm UTC](https://boards.straightdope.com/t/one-last-attempt-at-understanding-investment-risk/577711/33 "2011-04-09T19:19:39Z")
> [@emacknight](#):
>
> When I asked the same question involving a restaurant, the relative wealth of the owner vs the dishwasher was the most important variable. I find it strange that isn’t a factor this time.
It’s because people (possibly including you) are mixing up questions about investment and risk with questions of the justness of the system within which those investments are made and risks taken.
So they try to answer questions about the former, and end up accidentally answering the latter instead, and everything gets confused.
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### Author:  [@Frylock](https://boards.straightdope.com/u/Frylock)
#### Post date: [April 9, 2011, 7:21pm UTC](https://boards.straightdope.com/t/one-last-attempt-at-understanding-investment-risk/577711/34 "2011-04-09T19:21:13Z")
> [@](#):
>
> the dishwasher was [morally] entitled to more than his salary
Sorry, I honestly don’t think anyone said that in the other thread. But did I miss something? (It was a long thread…)
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### Author:  [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)
#### Post date: [April 9, 2011, 8:15pm UTC](https://boards.straightdope.com/t/one-last-attempt-at-understanding-investment-risk/577711/35 "2011-04-09T20:15:40Z")
> [@xenophon41](#):
>
> Can’t have ownership without risk, that’s true. So you’d agree that holding the deed, rather than having made the investment, is what both entitles and obligates Johny in the two scenarios of the OP?
Sure, but the OP is explicitly asking about it in terms of risk and using the would “should”.
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### Author:  [@emacknight](https://boards.straightdope.com/u/emacknight)
#### Post date: [April 9, 2011, 9:04pm UTC](https://boards.straightdope.com/t/one-last-attempt-at-understanding-investment-risk/577711/36 "2011-04-09T21:04:09Z")
> [@Frylock](#):
>
> Sorry, I honestly don’t think anyone said that in the other thread. But did I miss something? (It was a long thread…)
Unfortunately, people quickly rushed in to defend the dishwasher, insisting that he risked far more than the owner, most notably that he “risked losing his job.”
From here the owner was demonized to suggest he didn’t server to earn profits.
And then it was repeatedly pointed out that the dishwasher had a moral right to some of the profits.
All suggesting a lack of understanding how [investment] risk works. At least so far as how profits should be payed out.
All of the statements made about the owner of the restaurant could just as easily be made here, just as all the statements about the dishwasher could apply to the tenant. At least so far as scenario 1 plays out.
But what I love most is that eventually talk of risk brings up the crash of 2008, which makes home owners the victims. And suddenly we see scenario 2 where the hero just happens to be the villain from scenario 1. It’s a little like watching Terminator 2.
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### Author:  [@Frylock](https://boards.straightdope.com/u/Frylock)
#### Post date: [April 9, 2011, 9:39pm UTC](https://boards.straightdope.com/t/one-last-attempt-at-understanding-investment-risk/577711/37 "2011-04-09T21:39:07Z")
Could someone reading this thread who said the dishwasher is entitled to more than the agreed-on wage please raise their hand here, so I can more easily go find the relevant post?
Thanks…
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### Author:  [@Wesley\_Clark](https://boards.straightdope.com/u/Wesley_Clark)
#### Post date: [April 9, 2011, 10:09pm UTC](https://boards.straightdope.com/t/one-last-attempt-at-understanding-investment-risk/577711/38 "2011-04-09T22:09:58Z")
Destroying the means of private ownership is the best solution in this situation. By doing that you eliminate egoism among the populace, which can lead to a rejection of the teachings of Comrades Lenin and Kim Il Sung.
Communism works, we just haven’t tried a purified form of it yet.
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### Author:  [@emacknight](https://boards.straightdope.com/u/emacknight)
#### Post date: [April 9, 2011, 10:12pm UTC](https://boards.straightdope.com/t/one-last-attempt-at-understanding-investment-risk/577711/39 "2011-04-09T22:12:53Z")
> [@Frylock](#):
>
> Could someone reading this thread who said the dishwasher is entitled to more than the agreed-on wage please raise their hand here, so I can more easily go find the relevant post?
>
> Thanks…
Interesting you should ask:
> [@Understanding Risk](https://boards.straightdope.com/t/understanding-risk/576302/258):
>
> Are there literal-first-and-last-name dishwashers anyone can cite that demanded profit sharing? Of course not. But there are proxies for them who feel what is rightfully owed them. Examples:
>
> **Frylock**
> I’m someone who sometimes finds himself thinking workers should get a share of the profits.
>
> **Voyager**
> The big problem with the OP is that it assumes that only the investor deserves upside benefit. If the restaurant is a success, the reason isn’t that her money is any greener than anyone elses. The more an employee can contribute to the success, the more that employee deserves of the upside benefit.
>
> **Chronos**
> But why would risk be the only thing that deserves profit? The chef might not have much risk himself, but the quality of the food he makes is going to change how much risk there is to the owner. If you’ve got a really good chef who turns your restaurant from being an iffy proposition to a sure thing, doesn’t he deserve a reward for that?
>
> **Whack-a-Mole**
> Workers ARE the company. … As such it is not improper to expect the owners to see that their labor benefits from the success of the company.
>
> Are any of these posters an actual “dishwasher”? I don’t know and I don’t care. It’s irrelevant to the debate. However, you can bet the many dishwashers believe profits (beyond their salaries) also belong to them and the posters here are speaking on their behalf.
>
> If there was a debate about universal health care, it’d be like asking if anyone knows any citizen that demanded a free health care card at their state driver’s license office. WE ALL KNOW THAT SCENARIO PROBABLY DIDN’T HAPPEN. That silly debate technique is just trying to shut down the discussion in a childish way.
>
> Once again, the OP isn’t trying to correct a dishwasher’s flawed legal interpretation of status quo corporate laws. The idea is to argue against the _beliefs_ exhibited by the 4 posters (and any silent “virtual dishwashers” that agree with them). That is the _spirit_ of the debate. If you don’t want to participate, you don’t have to.
To suggests workers should get a share of the profits is no different than suggesting the tenant should get a share of the proceeds in this sale.
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### Author:  [@Ruminator](https://boards.straightdope.com/u/Ruminator)
#### Post date: [April 9, 2011, 10:20pm UTC](https://boards.straightdope.com/t/one-last-attempt-at-understanding-investment-risk/577711/40 "2011-04-09T22:20:27Z")
> [@Frylock](#):
>
> Could someone reading this thread who said the dishwasher is entitled to more than the agreed-on wage please raise their hand here, so I can more easily go find the relevant post?
Several people said it – including you, **Frylock** :
[http://boards.straightdope.com/sdmb/showpost.php?p=13639506&postcount=258](http://boards.straightdope.com/sdmb/showpost.php?p=13639506&postcount=258)
You said, _“I’m someone who sometimes finds himself thinking workers should get a share of the profits.”_ You are not alone with this feeling. What’s also not surprising is that you and your like-minded friends never offer to _sacrifice your workers’ savings account to help share the losses_. I wonder why?
And to be absolutely clear, both sides of the argument already know that nobody has said workers are _legally_ entitled to profits. We are talking about what people _feel_ and _believe_ is _morally right_, or _fair_. Please let’s not rehash the legal vs moral confusion which nobody is even talking about. You asked about “morals” and there are several posts that propose what those morals “should” be.
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