just wait and see

There was an interesting business concept that I came across a while back, I can’t remember who created it but it’s definitely not original content by me.

The idea is that in business you have to take risks to make money (Duh). A simple risk is holding inventory that may not sell, or maybe you make a significant investment of time to create something useless.

Most people are risk adverse, the good news for them is that most risks can be mitigated or at least insured. There establishes an economical demand for reassurance that things will not go wrong.

Here the concept states that all profit can be allocated to some form of risk taken by an entrepreneur. The opportunity is for every risk taken the potential reward grows.

To be profitable you need to take risks where the potential reward is greater than the potential cost, better known as taking ‘calculated risks’.

Imagine a theoretical risk (Could be anything) and most people don’t want to take this risk. However, according to your own knowledge/resources/skill you conclude that the pay-off is greater than the potential cost. So you take their money and they don’t have to deal with this risk (You profit from the calculated risk as well as from the customer).

Skill is simply how good you are at understanding the risks associated with an activity.