[s1artibartfast]

I think you have an excellent analogy. The thing I like about it is it includes the fact that there is often a large cost for not taking risk. I feel like a lot of otherwise smart people get caught up in avoiding risk buy overlooking the cost to do so.

In my opinion there's a hierarchy of understanding but I've gone through. The first is not understanding risk, followed by understanding risk and avoiding it, followed by understanding the cost of avoiding risk and trying to find the right level.

Like you point out, the cost of avoidance can be quite substantial.

[bruce511]

Yes, because risk has value, there are substantial gains yo be made taking on risk (and it working out), not to mention substantial losses by both avoiding risk or taking the risk on and it not working out.

From a purely business perspective its ideal to make the other guy take the risk, without financial penalty. More often both parties understand risk and can figure out who wants the value/risk and who prefers the less value/less risk.

[s1artibartfast]

I dont disagree. My point is mainly that if you are always avoiding risk and incurring the cost, you probably aren't doing it right, and probably don't understand the costs you are paying.

Not all losses are substantial, and not all substantial losses are greater the cost to avoid it. don't pay $20 for insurance on a $1 package.