Wednesday, September 17, 2008

Risk = Danger + Opportunity

I have always believed that the Chinese symbol for risk, which combines the symbols for danger and opportunity, is the best definition of risk. Danger and opportunity are connected at the hip, something worth remembering in both good times and bad. In good times, opportunities abound, and the salespeople for these opportunities (brokers, hedge funds) tell us that there is little or no danger: those 70% returns are touted as "low-risk". In scary times, all we see is danger and no investment looks good. In both cases, we would be well served stepping back and looking for the link. Lucrative opportunities always expose us to risk, even in the best of times. And dangerous times bring opportunities, if we keep our eyes open and our wits about us! 

6 comments:

Sergei said...

First of all, professor, thank you for starting this blog. I always enjoyed your sharp observations when I was taking your classes. It is great that you decided to start sharing them online.
Now, some time ago I mentioned how you talked about "Risk = Danger + Opportunity" to one of my co-workers, and he emailed me the following:

Two different academics have argued online about whether the pair of Chinese characters for “crisis” (not “risk”) equals the characters for “danger” and “opportunity”. Turns out the first character definitely means “danger”, but the second one is kind of like a suffix that, by itself, just means “moment” (arguably a good kind of moment), and shows up in an entirely separate pair of Chinese characters for “opportunity” (http://158.130.17.5/~myl/languagelog/archives/004343.html)
So, bottom line is, the interpretation of the Chinese characters for “crisis” as “danger + opportunity” is a fudge.


I found another source, which seems to confirm the above. I am definitely not an expert in Chinese dialects, but it looks like "Risk = Danger + Opportunity" is a bit of a stretch, although a very-nicely-fitting one.

Sergei Ryabkov

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