Lower risk increases the present value of future opportunities, but reduces the opportunity gradient. You can imagine an opportunity gradient as a plot of your value at a series of points in your future. The greater the gradient, the steeper the increase in that curve between any two future points. A result is that low risk, long term plans reduce learning, but that may warrant it’s own post.<\/p>\n\n\n\n
People have a natural urge for risk in their lives. This seems very strange, and is often counter to maximizing value. For example, why do objectively rich people with stable futures do dumb things like climb Mount Everest or ride rockets? These activities are extremely costly for these demographics; the risk reduces the present value of their giant piles of investments and future income! (Also, they might die!) <\/p>\n\n\n\n
Hypothesis: people are more interested in maximizing their opportunity gradient than they are in maximizing their present value. They want their future to offer more value than they have today. High interest rates (risks) are more exciting and interesting than an unused pile of money. <\/p>\n\n\n\n
A quick and easy way to increase that gradient of future value is to take dumb risks today. These risks may not increase future value, but they immediately reduce present value, thus increasing the relative future value and, consequentoy, the gradient. (When theres nothing left to lose, you have everything to gain!) Risk stops the present from stealing all the value of your future actions.<\/p>\n","protected":false},"excerpt":{"rendered":"
Lower risk increases the present value of future opportunities, but reduces the opportunity gradient. You can imagine an opportunity gradient as a plot of your value at a series of points in your future. The greater the gradient, the steeper the increase in that curve between any two future points. A result is that low… Continue reading Risk, present and future value<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":["post-23","post","type-post","status-publish","format-standard","hentry","category-nonfiction","entry"],"_links":{"self":[{"href":"https:\/\/www.mirrorofimagination.com\/blog\/wp-json\/wp\/v2\/posts\/23","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.mirrorofimagination.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.mirrorofimagination.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.mirrorofimagination.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.mirrorofimagination.com\/blog\/wp-json\/wp\/v2\/comments?post=23"}],"version-history":[{"count":5,"href":"https:\/\/www.mirrorofimagination.com\/blog\/wp-json\/wp\/v2\/posts\/23\/revisions"}],"predecessor-version":[{"id":32,"href":"https:\/\/www.mirrorofimagination.com\/blog\/wp-json\/wp\/v2\/posts\/23\/revisions\/32"}],"wp:attachment":[{"href":"https:\/\/www.mirrorofimagination.com\/blog\/wp-json\/wp\/v2\/media?parent=23"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.mirrorofimagination.com\/blog\/wp-json\/wp\/v2\/categories?post=23"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.mirrorofimagination.com\/blog\/wp-json\/wp\/v2\/tags?post=23"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}