[mixmax]

Facebook is a great example of a very risky bet that paid off bigtime. As you say, noone in their right mind would have predicted that facebook would grow this big - but the VC's that did and took a huge risk got an enormous paycheck out of it. The same Vc's probably invested in a lot of other companies that turned out to be losses.

Basically my premise is that risk x potential payout is a fixed number. Invest in a McDonalds franchise on your local highstreet and you will have a high probability of a low return. Invest in crazy stuff like facebook abd you have a low probability of a high return.

As you say, it's a simplicfication but I think it holds true in general.