Isn’t it the same for the people “risking” their money? The only “risk” is that they lose their bet, meaning they have to go find a job like the rest of us.
Let's say you have $50k in savings and an offer in hand for Microsoft or a startup idea of your own.
If want to work on your idea, but you don't already have connections to tap for immediate VC funding, any work you do on it is earning $0 income while you're still having to pay the bills. Your downside risk is that after X number of months or years, you've lost $Y dollars of your starting savings.
If you take the Microsoft offer, your downside risk is that after X number of months or years, you get laid off, and have to look for a new job, but your $50k is still there, and quite possibly a bunch of new savings as well.
No, it's not the same. An uncapped downside would be something like shorting stock. The price of the stock can be unbounded, and you owe the difference between the current stock and the price you opened your short position. So you can literally lose an unlimited amount of money.
majormajor|3 years ago
If want to work on your idea, but you don't already have connections to tap for immediate VC funding, any work you do on it is earning $0 income while you're still having to pay the bills. Your downside risk is that after X number of months or years, you've lost $Y dollars of your starting savings.
If you take the Microsoft offer, your downside risk is that after X number of months or years, you get laid off, and have to look for a new job, but your $50k is still there, and quite possibly a bunch of new savings as well.
epicureanideal|3 years ago
rcme|3 years ago
koof|3 years ago