Risky Business

[Motokid]

I am reading “Retire Rich Retire Young” by Robert Kiyosaki and early on he discusses “risk” and how risk effects peoples decisions and actions. More than likely if you view something as a risk you’ll shy away from it. The greater the risk appears the less likely you are to attempt whatever that risk might be. Simple right? Are you more likely to skydive or ride a bicycle?

If anybody would be interested in starting a thread in the book discussion area on any of Kiyosaki’s books I’d love to join in or start a thread, but since most here appear to read other things I just wanted to ask this:

What do you do, if anything, that other people or society in general would perceive as risky?

Do you skydive, bungee jump, deep-sea dive, juggle chain saws, eat raw pork….anything that somebody else would maybe not consider doing but you do it be just because it’s fun.

I ride a motorcycle. I used to road race. The kind of motorcycle racing where the rider leans way over and touches his/her knee to the ground in the corners. I love anything and everything about all motorcycles. Many people would never dream of even taking a ride on a motorcycle because “they are too dangerous“.

How ‘bout you? Anything?

 

[Smiler]

No. No. No. No.

 

[novella]

Risk perception is conditioned by experience.

If you grow up learning how to invest, discussing investment strategies, you won't perceive financial investment as particularly risky because you know where the traps lie and how to hedge your risks. In terms of business I think hiring the wrong people is far more risky than investing.

I grew up swimming in the ocean, surfing and bodysurfing big waves. The bigger the better. Inlanders I know perceive that as risky. Maybe it is to them, but not to me, because I know how to handle that particular risk.

Funny enough, my bro skydives, free falls, and also does triathalons. He nearly killed himself on his bike last year. Now he's a little bike shy, but he'll still jump out of a plane.


The biggest risks I perceive in my life are traffic accidents (I'm really big on defensive driving techniques) and corruption and self-interest bankrupting the country (not kidding--I'm a bit of a conspiracy theorist with this). I also figure I'll get cancer someday from a source I can't control, which is a high probability, but I don't worry about it in the specific. You've got to die from something, right? But I do take vitamins and eat a lot of vegetables, stay away from cigs and try not to get irradiated.

 

[Motokid]

"Risk perception is conditioned by experience."

Which is precisely Kiyosaki's point. If your parents had always been self-employeed, and had amassed quite a small empire you would never concieve of starting your own business as being a major risk that's not worth taking.

If your parents once invested what they would consider a small fortune in the stock market and subsequently lost it all, they would view the stock market as such a huge risk that you would probably never consider putting your money into anything like that based on what your parents taught you, and told you about their experience.

I would never consider riding a motorcycle as a huge risk. I know that there are risks, but nothing so huge that it would keep me off mine. To me it's one of the closest feelings I can imagine that would mimic what it's like to be able to fly. It's really a whole different experience than driving a car or riding a bicycle.

 

[novella]

It may seem obvious to someone who's read around this subject a lot (like you Moto), but I also think that many people who invest in the stock market do not perceive the real risks that are there, do not research the risks and how to handle them, and they end up making big mistakes.

A cautionary tale: I know a guy who was trading for a big company in Boston. He decided he could make some money by enticing his mother's friends to invest through him. He proceeded to bleed their savings accounts with frequent trading, taking the commissions, and not caring about their losses. Some of them wound up losing a lot of money. The guy, of course, acted unethically but not illegally, as they had given him carte blanche to trade their accounts, and they put their trust in him. He was young and ambitious and that outweighed everything else. His attitude was, "they should have known better."

I also know two instances where people acted on so-called tips and got burned. They knew nothing about how to hedge investments or how to check out bona fides.

NB: one of my brothers was a trader in NYC for 15 years. Both of these scenarios are commonplace and show why it's considered an insider's game.

 

[Motokid]

Exactly right novella. Kiyosaki then relates stock market investing to Real Estate investing.

While no reputable bank would ever lend Joe Anybody money to invest in the stock market many will at the very least beat a path to his door to lend him money for a mortgage.

So which risk is the highest, stock market or real estate? According to what the banks will do that's a no brainer.

Interesting concepts and ideas. I dig these books and the different ways they make me think.

 

[novella]

Trading in real estate is a lot more akin to trading in commodities futures. At least you are not at the mercy of someone like Ken Lay and whether he feels like behaving himself or whether he's going to hide debt and steal and make backroom deals.

Also, the risk related to mortgages is assessed in terms of the buyer's income forecasts, which is well-trodden ground for actuaries. The risk of buying property that will be worth nothing someday is pretty small.

 

[Motokid]

I'm gonna try this image thingy here (hope it works)...

My new toy as of today:

just a tad risky...

 

[jenn]

my husband sends his heartfelt appreciation in the form of a grunt.

 

[Motokid]

jenn - tell your old man, ugghhh ugh ughhh ughhhhh aaaahhhhhh....

I don't have title, tag or insurance for it yet, but I probably put 15 miles on it around my neighborhood. Never went faster than about 30mph and couldn't wipe the shit-eatin grin off my face for hours. The raw power is intoxicating and addicting.