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Opportunity versus Risk

I am watch the show "The Men Who Built America" on the History channel and they were talking about JP Morgan investing money in an unproven commodity, electricity. They said that JP Morgan saw opportunity where others saw risk.

Any time a leader is about to invest time, money or energy into a venture they want to weigh the risk and reward of that venture. They need to determine if the opportunity far outweighs the risk that is involved. JP Morgan was a banking man and he didn't find success by investing in bad ventures. When he saw Edison's light bulb he knew that the opportunity was too great to pass up when compared to the minimal risk. We still to this day use the Edison light bulb and electricity so JP Morgan seized that opportunity and it paid off.

Pay offs don't always occur you have to make sure what you are investing in seems worthwhile and will establish itself as a strong comsumer commodity. For instance if someone approached you to invest in a new business they were starting you would have to ask a few questions before leaping up and investing.

You might ask:
  • Has this ever been done before?
  • Is there a long lasting need for this product or commodity?
  • Is the appeal for this widespread or isolated?
  • What is the ROI (Rate of Investment)?

There are other questions you might ask but these four should give you a good indication if it is worth your time and money to invest. If you do decide to invest I hope the payoff is successful and if not wait for the next big thing and look to invest in that.
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Unknown said…
Some great points in this post!! "For which of you, wanting to build a tower, doesn't first sit down and calculate the cost to see if he has enough to complete it?"

Something we all need to do before making a decision!
9:37 PM, February 03, 2013
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