"Education is the passport to the future, for tomorrow belongs to those who prepare for it today" - Malcolm X

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Wednesday, August 03, 2011

Risk Aversion and Future Investments in the Next Generation

In life there is risk and it quite safe to say those who takes the greatest risk achieve the highest rewards. Risk Aversion - A characteristic of being averse to risk and one could argue the current state of nation when it comes to future investments in the next generation.

A risk adverse individual or nation prefer certainty and would choose to keep h/her money as oppose to investing in a risky venture like public education. There's no certainty or guarantee that every child will be a success or the next Einstein.

I was listening to a segment on NPR about health care in Bisbee, Arizona in which the mayor indicted until his stroke he never went to a hospital. If the investment risk had not been taking to provide a hospital in Bisbee the mayor would be dead or paralyzed.

An investment in health care or insurance will generally have a higher expected value than going without, risk mitigation, as opposed to a game of roulette in which you assume all risk by playing. In insurance, you pay the company to assume a risk for you. Risk mitigation allows one to reduce the aversion to risk.

Knowledge is the Key to understanding risk and the mitigation of risk. The one who's not averse to risk has the knowledge and clarity on how to mitigate risk. Having the knowledge reduces the fear and builds confidence which in-turn brings the rewards. Understanding the baselines of life's and it boundaries is derived through knowledge i.e. wisdom, an understanding of life.

Matt Damon on the Value of Teachers, what I call Societies Risk Mitigation Tool for the next generation