# Understanding Risk **URL:** \ **Category:** Great Debates\ **Created:** [March 28, 2011, 8:06pm UTC](https://boards.straightdope.com/t/understanding-risk/576302 "2011-03-28T20:06:25Z")\ **Posts on this page:** 20\ **Page:** 13
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [March 31, 2011, 9:41pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/241 "2011-03-31T21:41:38Z")
> [@emacknight](#): > > So you made a claim that you can’t back up? Why in heaven’s name would I waste time demonstrating a claim **that you announced you would consider irrelevant whether true or not?**. 😕 :smack: I did ask you to select one or two of your 4 mutually contradictory arguments if you wanted an answer. Please try reading for better comprehension. > [@emacknight](#): > > Maybe now you’ll tell us what your issue is with the practice. **You** were the one who claimed, verbosely, that stock options were a way to give profit-making incentive to executives. Various practices, especially the repricing of options after a fall in stock prices, make such options have a large component, effectively, of simple cash bonus and less of a component of profit-making incentive. Do you understand that, or do I need to connect the dots more thoroughly? ---
**Author:** ![Buck\_Godot](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/buck_godot/32/6573_2.png) [@Buck\_Godot](https://boards.straightdope.com/u/Buck_Godot)\ **Post date:** [March 31, 2011, 9:46pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/242 "2011-03-31T21:46:06Z")
> [@emacknight](#): > > Two friends decide to bet on the flip of a coin, each puts down $100. > > They each risk the same $100, and have the same 50/50 odds of success or failure. > > The issue most face in this thread is the question of is that risk acceptable? If one is rich that $100 is chump change, if the other is poor that $100 is everything he has. > > What most are describing as “risk” in that scenario is not in fact risk, but risk tolerance. > > Both friends have the same risk ($100) and the same odds of losing it (50/50). It is now up to each individual player to decide if that risk is acceptable to him/her. Do she have a tolerance for risk? We know the potential downside, $100 loss, and we know the potential upside, $100. > > If the super sad poor guy is so poor he can’t risk losing $100, he shouldn’t be betting. > > Now, back to the OP to again understand risk: > > -\> Owner puts up $10,000 and runs the restaurant unsuccessfully for a year. At the end she closes it, liquidates, and ends up losing all $10,000. She also didn’t get a salary for the year because as the sole investor she is paid from the profits (dividends). > > -\> Dishwasher invested nothing. She showed up, worked hard, got paid\*. At the end of the unsuccessful year she is now $20,000 richer for her time spent. The idea that the dishwasher is out of a job has no relevance to this discussion. Her employment is based entirely on the health of the industry, not on the restaurant. > > Both are out of a job, but who lost more? Who gained? > > Tell me again how much the dishwasher risked. > > \*In this scenario I am assuming enough solvency to pay staff and creditors. Of course the dish washer may have moved across town or quit a previous job to work for the employer so she might not actually be as well or better than she started when the business fails. The problem I’m seeing with this debate is that you are basically defining risk according to your definition of investment risk, which is a fine definition, but I don’t see where that gets you as far as what is equitable regarding compensation. Much the same way as I can say that I define dogs as members of Canis lupus familiaris, such that a coyote is not a dog. This is a fine definition, but I doubt it will work for me if I try to bring my pet coyote into a park with a “No Dogs Allowed” sign. ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [March 31, 2011, 10:04pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/243 "2011-03-31T22:04:31Z")
> [@septimus](#): > > Why in heaven’s name would I waste time demonstrating a claim **that you announced you would consider irrelevant whether true or not?**. 😕 :smack: Because it is irrelevant. And you have yet to show otherwise. This is also Great Debates, where you are expected to back up your assertions whether relevant or not. You brought it up what 3, 4 times now. It’s apparently VERY relevant to you, why not share with the rest of the class? > [@septimus](#): > > I did ask you to select one or two of your 4 mutually contradictory arguments if you wanted an answer. Please try reading for better comprehension. They aren’t mutually contradictory. You don’t understand the issue you’re trying to bring up, it’s obvious you don’t understand stock option awards or executive compensation. You dropped that steaming turd in here as a non-sequitur then demanded I address it, but refused to back it up. Perhaps you’d like to tell us what it has to do with the topic at hand. > [@septimus](#): > > **You** were the one who claimed, verbosely, that stock options were a way to give profit-making incentive to executives. Yes, because they are. The have the benefit of offering ownership in the company, without actually giving cash value at the time of transaction. If the stock price goes up, the options are worth a lot of money, and it costs less than just giving stock because the recipient has to buy the stock before selling it. But unlike being given a bunch of stock, they don’t have the same tax implications. > [@septimus](#): > > Various practices, especially the repricing of options after a fall in stock prices, make such options have a large component, effectively, of simple cash bonus and less of a component of profit-making incentive. Because they do have a large component of simply being a cash bonus. Were you not aware of that? They could just as easily give the bonus in a foreign currency or precious metal. If the understanding was that it would be worth $10,000 then they’d probably offer more if suddenly gold wasn’t worth anything any more. As I showed in my example, if the options were issued at $60, but the stock price falls to $40, those options are no longer an incentive, cash bonus, or profit sharing method. They have zero value until the company stock is over $60 again. You knew that right? It’s not that they are worth less, they are worthless. If you want to blame the CEO for the fall in stock price, then it make sense to me that he would lose that cash bonus. If the entire market went to shit, but you want to retain your CEO, it makes sense to reprice the options you offered him. You do realize that stock option awards have no value until they’re cashed in right? > [@septimus](#): > > Do you understand that, or do I need to connect the dots more thoroughly? I would love to see what your dots actually turns out to be. My guess is Scooby-doo. So do tell us, what is your issue with the reprising of stock options? And what does it have to do with the OP? ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [March 31, 2011, 10:17pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/244 "2011-03-31T22:17:52Z")
> [@Buck\_Godot](#): > > Of course the dish washer may have moved across town or quit a previous job to work for the employer so she might not actually be as well or better than she started when the business fails. Of course, but all that exists independently of the profit the restaurant makes in year one. All are risks that the dishwasher faces on his own, like crossing the street against the light. The most important factor that you’ve missed is that the dishwasher gets paid, independently of profit the restaurant makes. This statement, as made several times before, speaks more towards job security oh which there is none, ever. And again that speaks more to the health of the industry than of that specific restaurant. The actions you describe are decisions the dishwasher has to make in his life. The point I have to keep making is that the dishwasher will get paid. He’s not moving across town in the hopes he’ll get paid, he will get paid\*. > [@Buck\_Godot](#): > > The problem I’m seeing with this debate is that you are basically defining risk according to your definition of investment risk, which is a fine definition, but I don’t see where that gets you as far as what is equitable regarding compensation. No, the reason for this debate is that a lot of people gloss over the investment risk, jump right to the personal risk of the dishwasher, and then make a claim (moral or otherwise) for the profits resulting from the investment risk. Look at how quickly someone dismissed the capital put in as someone’s chump change, people turned the restaurant into a tax shelter set up to fail. Then the dishwasher had to be made a hero, struggling single mom recovering alcoholic trying to make ends meet in this dog eat dog world. The risks that the dishwasher take, how ever great, will pay off 100% in the form of salary. True that salary may not last forever, but it’s not set up to. The owner has no obligation to run the restaurant forever. The world doesn’t work that way. Seriously though, how much more certainty can you get than being paid in cash at the end of the day? \*again assuming there is enough solvency. ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [April 1, 2011, 7:58am UTC](https://boards.straightdope.com/t/understanding-risk/576302/245 "2011-04-01T07:58:15Z")
> [@emacknight](#): > > I would love to see what your dots actually turns out to be. My guess is Scooby-doo. Your post made it very clear that you didn’t want to understand the point and didn’t try. Fine. I still believe the following post best summarizes OP itself: > [@emacknight](#): > > > [@septimus](#): > > > > As to OP itself, it seems to be a bizarrely verbose version of > > _Resolved: the investor who risks capital is the investor who risks capital_ > > Keep going… > > \*Resolved: the investor who risks capital is the investor who risks **LOSING** capital \* I find this exchange deliciously hilarious. Do you also need me to connect the dots for that? ---
**Author:** ![Whack-a-Mole](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/whack-a-mole/32/141_2.png) [@Whack-a-Mole](https://boards.straightdope.com/u/Whack-a-Mole)\ **Post date:** [April 1, 2011, 8:22am UTC](https://boards.straightdope.com/t/understanding-risk/576302/246 "2011-04-01T08:22:00Z")
> [@emacknight](#): > > What does that have to do with the price of tea in China? Is there something you’re trying to say? Use your words. > > ETA I found one making $94,000 > [The $94,000 secretary | All Over Albany](http://alloveralbany.com/archive/2009/03/04/the-94000-secretary) > > ETA2 The Secretary of the Treasury makes $194,000. You are kidding right? First I said “receptionist” and not “secretary”. Secretaries in some cases can make a lot of money and I know CEOs who prize a competent secretary highly and pay them very well. Second…Secretary of the Treasury? Really??? :rolleyes: Third, the point is no receptionists are demanding profit sharing. Who are all these people who you think have no clue and are demanding such things? ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [April 1, 2011, 9:20am UTC](https://boards.straightdope.com/t/understanding-risk/576302/247 "2011-04-01T09:20:59Z")
> [@Whack-a-Mole](#): > > You are kidding right? > > First I said “receptionist” and not “secretary”. Secretaries in some cases can make a lot of money and I know CEOs who prize a competent secretary highly and pay them very well. > > Second…Secretary of the Treasury? Really??? :rolleyes: > > Third, the point is no receptionists are demanding profit sharing. Who are all these people who you think have no clue and are demanding such things? Do you have anything to say that isn’t a non-sequitur? Have you read the OP? Do you know what we’re talking about here? Feel free to participate at any point. ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [April 1, 2011, 9:34am UTC](https://boards.straightdope.com/t/understanding-risk/576302/248 "2011-04-01T09:34:12Z")
> [@septimus](#): > > Your post made it very clear that you didn’t want to understand the point and didn’t try. Fine. > > I still believe the following post best summarizes OP itself: > > I find this exchange deliciously hilarious. Do you also need me to connect the dots for that? I love that you intentionally clipped the end of my quote, “Resolved: the investor who risks capital is the investor who risks LOSING capital and is the one who stands to gain from that risk.” Personally I wouldn’t consider altering someone’s quote to be hilarious but that’s just me. I’ve also been thinking about your issue with repricing stock options: Consider an executive hired at Caterpillar in the spring of 2008. He is highly skilled and offered a generous salary as well as 2000 stock options with a strike price of $70. At the same, a long time employee at Capterpillar is rewarded for his efforts with 100 stock options also at $70. A few months later the stock falls nearly 70%, and the options are completely and entirely worthless. The executive feels a little cheated since that was part of his hiring bonus, the employee feels a bit cheated because he worked really hard. So, they both talk to management and it’s decided that they can each get repriced options. Technically speaking, the “cash bonus” was factored in before the crash, it wasn’t either of their fault, no reason not to honour the original agreement, and reinstate the incentive. ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [April 1, 2011, 9:54am UTC](https://boards.straightdope.com/t/understanding-risk/576302/249 "2011-04-01T09:54:53Z")
> [@emacknight](#): > > I love that you intentionally clipped the end of my quote, > Personally I wouldn’t consider altering someone’s quote to be hilarious but that’s just me. Your post was almost as hilarious either way. You seem a little dense, so I clipped just to make the hilarity clear even to you. > [@emacknight](#): > > So, they both talk to management and it’s decided that they can each get repriced options. Technically speaking, the “cash bonus” was factored in before the crash, it wasn’t either of their fault, no reason not to honour the original agreement, and reinstate the incentive. I’m not opposed to compensating employees. Where you seem to have lost the thread is failing to grasp that repricing (among other factors) turns the option into more of a tax-beneficial cash bonus and less of the risk-and-profit-sharing incentive which was such a big deal to you earlier in the thread. ---
**Author:** ![Gyrate](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/gyrate/32/3588_2.png) [@Gyrate](https://boards.straightdope.com/u/Gyrate)\ **Post date:** [April 1, 2011, 10:09am UTC](https://boards.straightdope.com/t/understanding-risk/576302/250 "2011-04-01T10:09:52Z")
I’m still not convinced you’re all talking about the same things. I am, however, convinced I would never want to work for **emacknight**. ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [April 1, 2011, 10:15am UTC](https://boards.straightdope.com/t/understanding-risk/576302/251 "2011-04-01T10:15:04Z")
> [@septimus](#): > > Your post was almost as hilarious either way. You seem a little dense, so I clipped just to make the hilarity clear even to you. So you intentionally clipped my quote? And you do realize I added the “LOSING” part in response to the numerous times that fact got dismissed. _The owner is a millionaire with lots of restaurants, who cares if he loses $10,000. It’s the dishwasher that risks everything taking the bus to work._ > [@septimus](#): > > I’m not opposed to compensating employees. Where you seem to have lost the thread is failing to grasp that repricing (among other factors) turns the option into more of a tax-beneficial cash bonus and less of the risk-and-profit-sharing incentive which was such a big deal to you earlier in the thread. Stock option award are a tax beneficial bonus, that’s what they’re for and why they’re used. They also have the added bonus of being tied to profit sharing. I thought you knew that. But they also don’t work if the stock suddenly falls 70% because of outside factors. ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [April 1, 2011, 10:21am UTC](https://boards.straightdope.com/t/understanding-risk/576302/252 "2011-04-01T10:21:15Z")
> [@carm](#): > > In the restaurant of the OP, sure, the owner has the greatest risk. > > Now imagine another restaurant, except this time the owner has several other business investments. Lets suppose he owns ten restaurants. _Now_, all the owner is risking is 10% of his capital. If the restaurant goes under, who cares? He has another nine. The staff, on the other hand, now find themselves unemployed. They have arguably lost more (their entire livelihood) than the owner, who is still a long way from the poor house. > > You have picked the perfect scenario to come up with the conclusion you wanted, ie that capital owners risk everything and labour risk nothing. If the restaurant goes under, who cares? The evil capitalist still has nine others. It’s the employees that risk losing their jobs. ---
**Author:** ![Borzo](https://avatars.discourse-cdn.com/v4/letter/b/43a26b/32.png) [@Borzo](https://boards.straightdope.com/u/Borzo)\ **Post date:** [April 1, 2011, 11:32am UTC](https://boards.straightdope.com/t/understanding-risk/576302/253 "2011-04-01T11:32:48Z")
I don’t mean to take this thread off on a tangent, but why exactly are stocks viewed as “profit sharing”? Unless they pay dividends, I fail to see the correlation between stock value and actual profits. True profit sharing would be more along the lines of royalties (a portion of actual profits), no? ---
**Author:** ![Stratocaster](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/stratocaster/32/16393_2.png) [@Stratocaster](https://boards.straightdope.com/u/Stratocaster)\ **Post date:** [April 1, 2011, 12:06pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/254 "2011-04-01T12:06:18Z")
> [@septimus](#): > > Your post was almost as hilarious either way. You seem a little dense, so I clipped just to make the hilarity clear even to you. I thought it was bad form for you to clip it that way, too. Deliberately misleading, a dishonest maneuver. ---
**Author:** ![Whack-a-Mole](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/whack-a-mole/32/141_2.png) [@Whack-a-Mole](https://boards.straightdope.com/u/Whack-a-Mole)\ **Post date:** [April 1, 2011, 3:06pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/255 "2011-04-01T15:06:37Z")
> [@emacknight](#): > > Do you have anything to say that isn’t a non-sequitur? Have you read the OP? Do you know what we’re talking about here? Feel free to participate at any point. Non-sequitur? How so when I directly responded to _your_ post? Your whole thread is trying to point out that a dishwasher has no right to expect to share in the profits. Only the owners are entitled to that. So, where are these dishwashers and secretaries demanding a profit sharing scheme? This thread is titled “Understanding Risk” because, presumably, you think people don’t and you are here to enlighten us. So where are these people of which you speak? ---
**Author:** ![Whack-a-Mole](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/whack-a-mole/32/141_2.png) [@Whack-a-Mole](https://boards.straightdope.com/u/Whack-a-Mole)\ **Post date:** [April 1, 2011, 3:12pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/256 "2011-04-01T15:12:16Z")
> [@emacknight](#): > > Stock option award are a tax beneficial bonus, that’s what they’re for and why they’re used. They also have the added bonus of being tied to profit sharing. I thought you knew that. But they also don’t work if the stock suddenly falls 70% because of outside factors. Not a problem. You just try to re-price the stock options already granted or backdate them. These guys really know risk. > [@](#): > > Indeed, several compensation consultants, lawyers and governance experts tell Financial Week they’ve been contacted in recent weeks by corporate clients that are considering repricing underwater options at a lower exercise price or replacing those options with restricted stock. > > SOURCE: [http://www.financialweek.com/apps/pbcs.dll/article?AID=/20080218/REG/287644456](http://www.financialweek.com/apps/pbcs.dll/article?AID=/20080218/REG/287644456) ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [April 1, 2011, 3:34pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/257 "2011-04-01T15:34:49Z")
> [@emacknight](#): > > That’s precisely my point in the OP. Each person that adds value is paid in accordance with that value. The investor/gambler is thus the only one that stand to lose or gain capital. > > I broke it down into four key players: > > 1. Investor with the capital > 2. Person with skill > 3. Commissioned salesforce > 4. General labour. > > So the gambling scenario works just as well as the restaurant, or or a widget factory. > > The investor risks her capital by placing a bet. The skilled tradesmen risks her reputation. The commissioned salesman risks the money he could have made selling something else. The general labourer risks nothing. > > Consider if the bet wins: > > 1. Investor sees a return on his investment and is now richer. > 2. Skilled tradesman has increased his net worth, he can now demand more compensation. > 3. Commissioned salesman is paid based on the number of bets, she made her money but is now better off because the gambler can bet again if he so chooses. > 4. General labourer earned his income. > Consider if the bet fails: > 5. Investor loses his capital. It is gone. Regardless of how much he started with, he now has less. He put it at risk, and now it’s gone. > 6. Skilled tradesman has decreased his net worth. He risked his reputation and now it’s tarnished. > 7. Commissioned salesman is paid based on the number of bets, she made her money but that’s it. > 8. General labourer earned his income. > > Take a look at #4. He risked nothing, but gained in both cases. I think EVERYONE understandas what you are saying. I think you are glossing over stuff that other people are saying, mostly because you are defining risk to mean risk of loss of capital. ---
**Author:** ![Ruminator](https://avatars.discourse-cdn.com/v4/letter/r/b9bd4f/32.png) [@Ruminator](https://boards.straightdope.com/u/Ruminator)\ **Post date:** [April 1, 2011, 3:37pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/258 "2011-04-01T15:37:16Z")
> [@Whack-a-Mole](#): > > So, where are these dishwashers and secretaries demanding a profit sharing scheme? This thread is titled “Understanding Risk” because, presumably, you think people don’t and you are here to enlighten us. So where are these people of which you speak? I think you are complaining in the same vein as **septimus** and quite frankly, it’s a bit childish. You are asking about literal exact situations instead of just taking the **spirit** of debate for what it is. 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. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [April 1, 2011, 3:42pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/259 "2011-04-01T15:42:46Z")
> [@emacknight](#): > > The strawman I am trying to turn is the notion that the dishwasher (general labour) deserves some of those profits. It popped up in the labour/power debate, and in the union busting pit thread. It was mentioned several times in this thread: the owner has a moral imperative to share his wealth. The difference between profits and wages is not disimilar to the difference between dividends and interest. There is no moral imperitive, its just that in the past, more of the wealth generated by increases in productivity inured to labor but in the last few decades, it has gone almost entirely to the providers of capital. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [April 1, 2011, 3:50pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/260 "2011-04-01T15:50:18Z")
> [@emacknight](#): > > Most of us would agree that sky-diving is considered inherently _risky_. > > But consider two people jumping out of a plane: one is the soul earner for a family of 12, the other is a terminally ill cancer patient with a billion dollar life insurance policy. > > Both face the exact same risk, the issue you are looking at is risk tolerance. _Should_ they take that risk? They don’t risk the same thing. The terminal cancer patient risks less life and has a billion dollar hedge. [Previous page](https://boards.straightdope.com/t/understanding-risk/576302.md?page=12) [Next page](https://boards.straightdope.com/t/understanding-risk/576302.md?page=14)