risk tolerance

Mastering the Market Cycle: Getting the Odds on Your Side
by Howard Marks
Published 30 Sep 2018

Here’s a partial list: Government policies supported an expansion of home ownership—which by definition meant the inclusion of people who historically couldn’t afford to buy homes—at a time when home prices were soaring; The Fed pushed interest rates down, causing the demand for higher-yielding instruments such as structured/levered mortgage securities to increase; There was a rising trend among banks to make mortgage loans, package them and sell them onward (as opposed to retaining them); Decisions to lend, structure, assign credit ratings and invest were made on the basis of unquestioning extrapolation of low historic mortgage default rates; The above four points resulted in an increased eagerness to extend mortgage loans, with an accompanying decline in lending standards; Novel and untested mortgage backed securities were developed that promised high returns with low risk, something that has great appeal in non-skeptical times; Protective laws and regulations were relaxed, such as the Glass-Steagall Act (which prohibited the creation of financial conglomerates), the uptick rule (which prevented traders who had bet against stocks from forcing them down through non-stop short selling), and the rules that limited banks’ leverage, permitting it to nearly triple; Finally, the media ran articles stating that risk had been eliminated by the combination of: the adroit Fed, which could be counted on to inject stimulus whenever economic sluggishness developed, confidence that the excess liquidity flowing to China for its exports and to oil producers would never fail to be recycled back into our markets, buoying asset prices, and the new Wall Street innovations, which “sliced and diced” risk so finely, spread it so widely and placed it with those best suited to bear it. The existence of all the above elements indicated the presence of risk tolerance. In fact, they couldn’t have arisen if risk tolerance hadn’t dominated the psyches of investors, lenders, borrowers and regulators. The existence of risk tolerance like that seen in the years immediately preceding the Crisis should be very worrisome, as it implies an absence of worry, caution and skepticism. It is inescapable that these developments—and the risk tolerance or risk obliviousness that was behind them—ultimately would lead to unsafe financial behavior, particularly via the issuance of financial instruments that were unsound and likely to fail.

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In times of obliviousness toward risk—or high risk tolerance—the reduced demand in terms of risk premiums causes the slope of the line to flatten and the amount of risk compensation to shrink. The lower slope of the capital market line means, by definition, that the there’s less of a return increment per unit increase in risk. In simpler terms, the payoff for risk-bearing is sub-par. In my opinion, all of the above follows logically from direct observation. The process is as follows: positive events lead to increased optimism, increased optimism makes people more risk-tolerant, an increase in risk tolerance causes lower risk premiums to be demanded, a reduction in demanded risk premiums equates to lower demanded returns on risky assets, a reduction of demanded returns on risky assets causes their prices to rise, and higher prices make assets even riskier (but also attract buying on the part of “momentum investors” who chase rising stocks).

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Everyone feels the same, meaning little risk aversion is incorporated in prices, and thus they’re precarious. Investors become risk-tolerant just when they should increase their risk aversion. And when events are down, so are investors. They think of the markets as a place to lose money, risk as something to be avoided at all cost, and losses as depressingly likely. As I described at the end of the last chapter, under the excess of caution that prevails, (a) no one will accept possibilities that incorporate any optimism at all and (b) they likewise cannot countenance the possibility that an assumption could be “too bad to be true.” Just as risk tolerance is unlimited at the top, it is non-existent at the bottom.

All About Asset Allocation, Second Edition
by Richard Ferri
Published 11 Jul 2010

The advisor asks the woman to complete a risk tolerance questionnaire to find the maximum level of risk she can deal with. The woman completes the risk tolerance questionnaire, and the financial planner calculates the results. He concludes that the woman has the risk tolerance to handle an aggressive portfolio. The advisor suggests an asset allocation of 70 percent in stocks and 30 percent in bonds. Before recommending individual investments, the planner wishes to ensure that a 70 percent stock and 30 percent bond portfolio is not above the woman’s risk tolerance. Therefore, he asks her to take an asset allocation stress test.

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Being consistent with rebalancing is also a good test of risk tolerance. Investors will rebalance at the appropriate time without hesitation if their portfolio is within their risk tolerance. A portfolio’s asset allocation may be too aggressive if an investor hesitates on rebalancing in a bear market. If you are hesitant when stocks are suffering, it may be time to rethink your plan and make a permanent adjustment to the stock and bond mix. WHEN TO USE RISK AVOIDANCE Risk avoidance is a different concept from risk tolerance. Risk avoidance is a conscious decision not to invest up to your known risk tolerance level. This is a risk control measure.

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Only those investors who have an asset allocation at or below their tolerance for risk survive deep bear market. Finding an investment allocation that will survive during all market cycles is not easy, but it is worth the effort. RISK TOLERANCE QUESTIONNAIRES Risk tolerance questionnaires are common in the investment industry. Questionnaires are available through all mutual fund companies, brokerage firms, and private investment advisors. In addition, you can find them in financial planning books and in some investment-related magazines. The goal of risk tolerance questionnaires is to find the maximum level of risk that an investor is capable of handling. In doing so, they ask various questions about your investment experience and try to model your risk-and-return profile.

Beyond Diversification: What Every Investor Needs to Know About Asset Allocation
by Sebastien Page
Published 4 Nov 2020

Financial advisors, investment managers, consultants, individual investors, and everybody else involved in investment management must at some point determine their (or their end investor’s) risk tolerance and align the portfolio’s risk accordingly. If we ignore fat tails, we underestimate exposure to loss and take too much risk relative to the investor’s risk tolerance. Of course, risk tolerance itself is a fuzzy concept. Several years ago, a client asked Mark Kritzman and me how we calibrate risk tolerance. As usual, Mark had an interesting, tongue-in-cheek answer: There’s some research that was done at MIT to estimate people’s risk tolerance based on neurochemical science. For example, individuals with higher levels of specific enzymes may have higher risk tolerance. However, our clients have found the idea of a blood test a bit too invasive.

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They’re the engine of growth in investor portfolios. Clearly, the question is not as simple as one versus the other. There’s a role for both stocks and bonds in balanced portfolios. Investors must calibrate their stock-bond allocation based on their risk tolerance. But how do we determine the appropriate mix, given an investor’s risk tolerance? Or an even more difficult question: How do we estimate an investor’s risk tolerance? The so-called glide paths used in target-date funds (TDFs) provide a useful guide to adjust the stock-bond mix as a function of when an investor expects to retire. In a 2016 InvestmentNews editorial, I officially turned my coat on my PIMCO days.

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Consider risk premiums as possible small stand-alone investments, but beware of backtest results. 4. Solve this question first: What stock-bond mix matches the investor’s goals and risk tolerance? 5. Use portfolio optimization models, judgment, and experience to populate the stock-bond mix. 6. Consider alternatives as diversifiers, but beware of inflated returns and underreported risks. 7. Allocate between active and passive strategies as a function of active risk tolerance and fees. Notes 1. Robin Wigglesworth, “ETFs Are Eating the U.S. Stock Market,” Financial Times (January 24, 2017). Volume data are from Credit Suisse, as of 2016.

Personal Investing: The Missing Manual
by Bonnie Biafore , Amy E. Buttell and Carol Fabbri
Published 24 May 2010

A one-two punch of stock investments and time defeats inflation risk and equity risk. Up to Speed What’s Your Risk Tolerance? Balancing return and risk is essential, because greed and fear can mess up the best financial plans. (See page 45 to learn about psychological mistakes many people make when investing.) By matching your portfolio risk to your personal risk tolerance, you can sleep soundly while your investments are hard at work. Figuring out your true risk tolerance is more complicated than the approaches taken by most online tools. But you can get a sense of your tolerance with any of the following tests: • MSN Money offers a risk tolerance quiz (http://tinyurl.com/msnmoney-risk) that tells you two things: how comfortable you are taking risks and whether your personal circumstances are such that you can afford to take risks. • The Rutgers University website offers a risk tolerance quiz (http://tinyurl.com/ rutgers-risk) that identifies how comfortable you are with risk. • CalcXML.com (http://www.calcxml.com/do/inv08) determines your tolerance for risk by asking 10 questions about you, your financial situation, and how you would respond to several situations.

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But you can get a sense of your tolerance with any of the following tests: • MSN Money offers a risk tolerance quiz (http://tinyurl.com/msnmoney-risk) that tells you two things: how comfortable you are taking risks and whether your personal circumstances are such that you can afford to take risks. • The Rutgers University website offers a risk tolerance quiz (http://tinyurl.com/ rutgers-risk) that identifies how comfortable you are with risk. • CalcXML.com (http://www.calcxml.com/do/inv08) determines your tolerance for risk by asking 10 questions about you, your financial situation, and how you would respond to several situations. Your brokerage may also offer a tool for determining risk tolerance. For example, the Charles Schwab website has a risk profile questionnaire (http://tinyurl.com/ schwabriskprofile) that analyzes your risk tolerance and investment timeframe to determine what type of investor you are. 160 Chapter 9 But because your stocks need time to recover from the bottom of a business cycle or bad news about a company, you also need other types of investments.

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Most people see a little bit of themselves in a couple of the categories. This overlap is normal, so read all the descriptions and develop a plan that works for your personality. Insecure Confident Lower risk Protectors have low risk tolerance and are very insecure about money. They want to keep every nickel, even if it’ll be worth a penny in a few years. They’re emotional about their money, so rational arguments don’t persuade them. Higher risk Followers have a slightly higher risk tolerance, but are frightened by money. They don’t want to make bad decisions and they regret past decisions, so they want someone else to make decisions for them. Leaders are confident and willing to take risks to obtain higher returns.

Market Risk Analysis, Quantitative Methods in Finance
by Carol Alexander
Published 2 Jan 2007

Example I.6.4: Higher moment criterion for an exponential investor Two portfolios have the returns characteristics shown in Table I.6.3. An investor with an exponential utility has 1 million to invest. Determine which portfolio he prefers when he invests: $ $ $ $ $ $ $ (i) 1 million and his absolute risk tolerance coefficient is 200,000; (ii) 1 million and his absolute risk tolerance coefficient is 400,000; (iii) 1 million and his absolute risk tolerance coefficient is 100,000; (iv) only 0.5 million and his absolute risk tolerance coefficient is 100,000. $ 11 $ This approximation only holds when x is small. It follows from the expansion of ln1 + x given in Section I.1.2.5. Introduction to Portfolio Theory 237 Table I.6.3 Returns characteristics for two portfolios Portfolio Mean A B 10% 15% Standard deviation Skewness Excess kurtosis −05 −075 2.5 1.5 12% 20% Solution (i) The absolute risk aversion coefficient, as a proportion of the amount invested, is = $1000000 = 5 $200000 In the spreadsheet for this example the certain equivalent is calculated using the approximation (I.6.23) with this value for  and with the moments for each portfolio shown in Table I.6.3.

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Then your coefficient of absolute risk tolerance is 106 (measured in ) and your absolute risk aversion coefficient is 10−6 (measured in −1 ). Similarly, to determine the relative risk tolerance of a risk averse investor, which is the reciprocal of his relative risk aversion coefficient, we should present him with the following question. Suppose you can gamble a certain proportion x of your wealth W on a lottery where you receive either 2(xW) or 21 xW with equal chances. What is maximum proportion x that you are willing to bet? The answer is his relative risk tolerance. For instance, suppose you are willing to bet 20% of your total net wealth on a gamble where you are returned either double your net wealth or one half of it with equal chances, but you are not willing to bet more than this for a ‘double-or-half’ gamble.

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Portfolio A has a certain equivalent of 57,700 and portfolio B has a certain equivalent of 12,500, hence portfolio A is preferred. (ii) If the risk tolerance were 400,000 instead of 200,000 then  would be only 2.5 and portfolio B would be the preferred investment, with a certain equivalent of 92,188 compared with 80,763 for portfolio A. Hence, portfolio B is more attractive to a less risk averse investor. (iii) When the risk tolerance is small, i.e. the investor is very risk averse,  becomes very large and then both portfolios are considered too risky. In fact, if the risk tolerance is only 100,000 then  = 10 and the approximation (I.6.23) gives a negative certain equivalent for both investments.

Financial Independence
by John J. Vento
Published 31 Mar 2013

For example, an 18-year-old investor who has 49 years ahead of her before retirement can generally tolerate a much greater level of risk than a 60-year-old who is only 7 years away from retirement. Because the question of your own personal risk tolerance revolves around human behavior and emotions, it is important to understand your own investment psychology. I consider this the investor’s psychological evaluation of his or her risk tolerance. There are many ways to measure your risk tolerance and numerous questionnaires are provided at many investment websites. You can also find one at http://finance.yahoo.com/calculator; scroll down to “Career & Education” and click on “What is my risk tolerance?” You will find 10 risk tolerance questions to help identify your comfort level with investment risk.

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The information and guidance on investments that I provide in this chapter is designed to help you stay the course toward financial independence and your point X. Analyzing Your Risk Tolerance Every investor has his own unique view on risk and can only tolerate a certain amount of losses before he or she becomes emotional. This ultimately leads to bad investment decisions. Of course, a higher level of risk corresponds to the potential for a higher rate of return on your investments. If your investing risk tolerance were as simple as stating you want the highest rate of return in the long run, then you would simply invest in the most speculative types of investments.

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The appropriate investment plan for you should be the one that provides you with the highest potential rate of return in the long run that is within your risk tolerance. Part of determining your risk tolerance goes back to analyzing your personal behavior and how you deal with your other life issues. For example, if you typically are a nervous individual and tend to go down the straight-and-narrow path in life, then you most likely will choose a more conservative investment risk model. On the other hand, if you are fearless and like to live life in the fast lane, then you would most likely choose a more aggressive investment risk model. In evaluating your risk tolerance, you must also take into consideration what your ultimate financial goals will be.

Smarter Investing
by Tim Hale
Published 2 Sep 2014

Risk capacity is the amount of money you could lose without putting your important short and long term goals at risk. Risk tolerance is best understood as the amount of financial risk you would naturally be comfortable with taking, all else being equal. Risk required and risk capacity vary with individual circumstances over time whereas risk tolerance is an enduring and generally persistent personal trait. So here’s the rub. Rarely do all three line up. More often than not the risk you need to take (risk required) is more than you could afford to take (risk capacity) and more than you normally prefer to take (risk tolerance). Which is the dominant one for you? What is the right mix?

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It illustrates some research work that was undertaken using the period between May 1999 and December 2008 (Davey, 2009), which captures the last desperate moments of the technology boom and subsequent bust, the rise in the markets from 2003 to 2007 and the slump from the end of 2007. The global equity markets are overlaid on top of the average risk profile from the UK, USA, Australia and New Zealand. The conclusion is obvious: risk tolerance is a pretty stable trait. Figure A1.1 Risk tolerance appears to be stable despite market crashes Source: Risk tolerance – data from UK, US, Australia and New Zealand FinaMetrica © Copyright all rights reserved 2009. Global equities – MSCI (www.msci.com) Ascertaining your risk profile If you have ever used an adviser then you will no doubt have been subjected to some form of questionnaire or discussion about your ‘attitude to risk’.

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Ideally, you would own shorter-dated inflation-linked bonds and shorter dated conventional bonds, again hedged back to sterling if you go global (e.g. five years) as they have lower price sensitivity to changes in yields and therefore have a low level of volatility and thus short-term risk to capital. In practice your implementation options are somewhat limited by availability of suitable products, although that is slowly changing. This is discussed in more detail in Chapter 11. The more risk tolerant long-term investor At the other end of the risk spectrum, imagine that you are a pretty risk tolerant investor comfortable with suffering interim losses in pursuit of more aggressive goals. As a consequence you own a pretty high allocation of equities/risky assets, let us say 80%. Unlike the cautious investor, you are protected reasonably well from inflation by owning equities and global commercial property in your growth-oriented mix.

How to Kick Ass on Wall Street
by Andy Kessler
Published 4 Jun 2012

Again, risk is matched with risk tolerance. The buyer of the shares takes on the risk of future profits in exchange for their hard earned capital. It’s a decent deal, hopefully better than the short term interest rate a bank pays – a less risky return. Company shares trade every day, meaning individuals or funds of individuals can raise or lower their risk tolerance by owning shares of future profits in different industries. Getting a little old and not feeling so risky? You might buy shares in Kraft because everyone eats processed cheese. Maybe you have a higher risk tolerance? You buy shares of the future profits of Social Solar Mobility Nanoparticle Networks, hoping it becomes the next big thing.

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HOW WALL STREET IS REALLY SUPPOSED TO WORK This is a little bonus (don’t roll your eyes) on the future of Wall Street. Cocktail party conversation stuff. Enjoy: It’s easy to forget how Wall Street and banks and finance are really supposed to work. Home loans and stock trading and IPOs all exist to serve the economy, it’s ALL about the best way of allocating capital, by matching risk with risk tolerance. The rest is just expensive noise. Credit crises and panics happen. Capital gets misallocated. Markets aren’t all knowing. Banks make bad loans. All the time. It used to happen more often, but the Federal Reserve and the FDIC now smooth out these cycles, often pushing problems down the road until they blow up into a full blown panic.

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So banks found that longer term profit center of their own, lending you the money to buy a home, or a business the money to buy equipment, in exchange for monthly payments, a piece of the human profits you create or a piece of business profits. A pretty fair bargain – the bank takes on the risk of owning these fixed assets (if you fail to make payments) in exchange for a piece of your output. Risk tolerances are matched. Workers lower their take in exchange for ownership of a fixed asset they don’t really own outright. In fact, it’s a societal bargain as well. You gotta keep working. As Popeye’s pal Whimpie said, I’ll gladly pay you Tuesday for a hamburger today, but it meant Whimpie had to work the rest of the week to make enough money to pay off the burger if he ever wanted another one.

Bulletproof Problem Solving
by Charles Conn and Robert McLean
Published 6 Mar 2019

If you live in a town with high environmental quality, it reduces respiratory and cardiovascular illnesses and other diseases. If your runway has all the positives, you need to be planning to live longer. Consider Your Risk Tolerance Volatility around investment returns for your retirement account movements creates income uncertainty. Different individuals will have different risk tolerance for how to handle this uncertainty. If you believe you will have high longevity and you have low risk tolerance for depleting your savings, then you could consider buying an annuity that covers your lifetime and making adjustments to your budget to balance spending to income.

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It shows clearly that the employment share of non‐routine cognitive jobs is growing, as are non‐routine manual jobs, while routine cognitive and routine manual job shares are shrinking in share of employment. EXHIBIT 8.3 Source: St. Louis Fed, Jobs Involving Routine Tasks Aren't Growing (2016); Jaimovich & Siu, The Trend Is the Cycle: Job Polarization + Jobless Recoveries. You can use your inside knowledge about your personal level of ability, interests, and risk tolerance to guide your education and career choice decisions. Jeff Wald, the cofounder and president of WorkMarket asks, “What are you passionate about? Does that map to what skill sets are needed?”11 To do this, we begin with a simple chart to fill in. Each horizontal row in the chart represents a broad potential field or sector in which you may end up working; there are four vertical columns: The first is the current economic predictions for the field, the next are your personal assessments of your ability, interest, and ability to take risks.

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Each horizontal row in the chart represents a broad potential field or sector in which you may end up working; there are four vertical columns: The first is the current economic predictions for the field, the next are your personal assessments of your ability, interest, and ability to take risks. The first column can be completed and updated using economic predictions. For each potential field, subject area, or employment sector, you fill in your self‐assessed strength, interest, and risk‐tolerance levels in the second, third, and fourth columns. You can choose low, medium, or high, to rank your preferences. Exhibit 8.4 shows a filled‐in matrix for one of our research team members. EXHIBIT 8.4 Now how does this information help lead you to a decision? You can start by eliminating or pruning sectors in which you have low strength or abilities and low interest.

A Wealth of Common Sense: Why Simplicity Trumps Complexity in Any Investment Plan
by Ben Carlson
Published 14 May 2015

Of course, this means you have to have a handle on your risk profile and time horizon so you're able to assess how much money is reasonable to put at risk in stocks based on your personal situation. The Risk Tolerance Questionnaire Building a portfolio always comes down to determining your ability, willingness, and need to take risk. This is true for institutional and individual investors alike. If I had to boil down a risk tolerance questionnaire into two simple questions, here's what I would ask: When do I need the money? How much can I afford to lose in the meantime, both mentally and financially? Every other decision more or less branches off from these two questions.

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Notes CHAPTER 1 The Individual Investor versus the Institutional Investor Institutional versus Individual Investors We're All Human Extra Zeroes Long-Term Thinking Key Takeaways from Chapter 1 Notes CHAPTER 2 Negative Knowledge and the Traits Required to Be a Successful Investor The Biggest Problem of All Traits of a Successful Investor Standing on the Shoulders of Giants Key Takeaways from Chapter 2 Notes CHAPTER 3 Defining Market and Portfolio Risk Volatility: Risk or Opportunity? Understanding Rule Number 1 of Investing The Risk Tolerance Questionnaire Risk versus Uncertainty Risk Aversion The Cycle of Fear and Greed Key Takeaways from Chapter 3 Notes CHAPTER 4 Market Myths and Market History Myth 1: You Have to Time the Market to Earn Respectable Returns Myth 2: You Have to Wait until Things Get Better Before You Invest Myth 3: If Only You Can Time the Next Recession, You Can Time the Stock Market Myth 4: There's a Precise Pattern in Historical Market Cycles Myth 5: Stocks and Bonds Always Move in Different Directions Myth 6: You Need to Use Fancy Black Swan Hedges in a Time of Crisis Myth 7: Stocks Are Riskier Than Bonds Myth 7a: Bonds Are Riskier Than Stocks Myth 8: The 2000s Were a Lost Decade for the Stock Market Myth 9: New All-Time Highs in the Stock Market Mean It's Going to Crash Myth 10: A Yield on an Investment Makes It Safer Myth 11: Commodities Are a Good Long-Term Investment Myth 12: Housing Is a Good Long-Term Investment Myth 13: Investing in the Stock Market Is Like Gambling at a Casino Key Takeaways from Chapter 4 Notes CHAPTER 5 Defining Your Investment Philosophy Degrees of Active and Passive Management The Benefits of Doing Nothing Exercising Your Willpower Simplicity Leads to Purity Defining Yourself as an Investor Key Takeaways from Chapter 5 Notes CHAPTER 6 Behavior on Wall Street Threading the Needle So Never Invest in Active Funds?

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Table 4.11 Income Investments During a Market Crash (October 2007 to February 2009) Asset Gain/Loss High-Quality Bonds (BND) 6.8% Junk Bonds (JNK) –32.8% Corporate Bonds (LQD) –5.6% Dividend Stocks (SDY) –47.0% Preferred Stocks (PFF) –53.7% REITs (VNG) –64.1% Source: Yahoo! Finance. You can see the risks involved in those income-producing assets outside of high quality bonds. How far out you want to go on the risk spectrum depends on your risk tolerance, time horizon, and the amount of psychological pain you're able to withstand during a correction or crash situation. There's nothing wrong with allocating to a riskier portion of the fixed income universe of investments. Just understand the risks ahead of time. For some, the added risk will outweigh the rewards.

The Bogleheads' Guide to Investing
by Taylor Larimore , Michael Leboeuf and Mel Lindauer
Published 1 Jan 2006

Over a 70-year period from 1935 to 2004, we can clearly see that an investor in stocks for only one year could have lost 43 percent. However, the most unlucky investor who stayed in stocks for 10 years would have only lost 1 percent. Stocks are desirable as part of a portfolio for longterm goals due to their higher expected return. What Is Your Risk Tolerance? The first thing to do when developing an allocation is to come up with a risk profile. -Errold E Moody Knowing your risk tolerance is a very important aspect of investing and one that the academics have studied extensively. Their experiments prove that most investors are more fearful of a loss than they are happy with a gain. We all know people who are afraid of investing in the stock market because they know they might lose money.

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Risk-averse savers keep billions of dollars in CDs and bank savings accounts, despite their low yields. At the other extreme, we know of investors like Donald Trump who think nothing of investing hundreds of millions of dollars in speculative investments-and are seemingly unworried even when bankruptcy looms. Most of us have a risk tolerance that lies somewhere between these extremes. In order to help determine if your portfolio is suitable for your risk tolerance, you need to be brutally honest with yourself as you try to answer the question, "Will I sell during the next bear market?" Here are some stats that might help you answer that question. On March 10, 2000, the Nasdaq Composite Index reached an alltime closing high of 5,049.

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Over time, the longer-term bonds become intermediate-term bonds, the intermediate-term bonds become short-term bonds, and the short-term bonds eventually mature and are replaced with new bonds. Even though bond funds don't have a maturity date, they do have a measure to help bond fund investors determine if a particular bond fund might be appropriate for them, considering their time horizon and risk tolerance level. The term for that measure is duration. Duration is stated in whole and partial years, such as 4.3 years. Most nontechnical bond and bond fund investors simply use the duration figure to predict a bond or bond fund's price volatility in a rising or falling interest rate environment. The higher the duration figure, the more volatile the bond or bond fund would be in a changing interest rate environment.

The New Science of Asset Allocation: Risk Management in a Multi-Asset World
by Thomas Schneeweis , Garry B. Crowder and Hossein Kazemi
Published 8 Mar 2010

Satellite I portfolios as indicated in Exhibit 6.5 have correlations with the benchmark indices and with the core such that their use should not fundamentally change the market risk characteristics of the benchmark and/or investable core portfolio. SAMPLE ALLOCATIONS The decision that drives the asset allocation process is the underlying risk tolerance of the investor. As discussed in Chapter 4, an investor’s risk tolerance may cover a range of desired risk exposures.2 Typically those ranges have included conservative, moderate, and aggressive risk based portfolios. Within each of these risk tolerance classifications, investors may decide to invest primarily in traditional security investments or they may decide to place additional investments in the alternative investment area without dramatically changing volatility characteristics.

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This step begins by a description of the investor’s financial condition (assets, liabilities, financial goals, taxes, etc.) and then proceeds with an estimation of the client’s risk capacity and risk tolerance. 3. Optimal asset mix. In this final stage the above information is employed to develop an investment policy statement and to recommend a strategic optimal asset mix. If alternative investments such as private equity and hedge funds are to be included in an investor’s optimal portfolio allocation, investors need to determine: ■ ■ ■ If alternative investments such as private equity and hedge funds represent a distinct asset class and therefore should be included in the analysis taken place in Step 1. If individuals’ risk tolerance makes a compelling case for the inclusion of alternative investments in the optimal asset mix as determined from Step 2.

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For many portfolios, it is necessary to back into the asset allocation decision by first determining a reasonable set of investment vehicles with the desired liquidity and return characteristics. For most, xvi PREFACE traditional asset allocation remains the simple choice of mixing various asset classes to provide a mix of assets that offers increased expected return for a particular level of risk tolerance. However, as discussed previously there is no one definition of risk. Before risk can be managed, the fundamental risks impacting a particular investor must be understood. Chapter 9 reviews some of the major risks facing an investor as well as some common methods of managing them. Finally, we provide several examples of how simple approaches to risk management based on futures markets, options markets, and other basic forms of dynamic asset allocation can fundamentally transform the risk exposure of various investment vehicles.

No Slack: The Financial Lives of Low-Income Americans
by Michael S. Barr
Published 20 Mar 2012

While jewelry, gold, appliances, electronics, and the contents of a bank safe deposit box may not be equally liquid in the sense that there are different transaction costs associated with converting them to cash, the wording of these questions does not permit further refinement. 12864-10_CH10_3rdPgs.indd 225 3/23/12 11:57 AM 226 michael s. barr and jane k. dokko respondent’s month-to-month income fluctuated during the year preceding the survey.9 The risk tolerance and time preference questions are similar to those in the Health and Retirement Survey and discussed by Robert Barsky and his colleagues (1997). Risk tolerance measures the probabilities at which a respondent is willing to choose a gamble with lifetime income over the certainty of his or her lifetime income. The time preference variables measure whether a respondent would rather pay for a $300 appliance today or a series of higher amounts one year in the future. Barsky and others (1997) provide evidence that the survey measure of risk tolerance identifies individuals in the Health and Retirement Survey who are more likely to engage in risky behaviors.

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This point estimate, however, is similar in magnitude to the one in column 1. 15. In addition, controlling for risk tolerance and time preference suggests that portfolio allocation is correlated with wanting to overwithhold above and beyond what is implied by the permanent-income hypothesis. If, for instance, illiquid assets are riskier, then the standard portfoliochoice paradigm suggests that the relationship between asset allocation and withholding preference is driven by risk tolerance, with more-risk-tolerant (that is, less-risk-averse) individuals holding more illiquid assets and wanting to hold more illiquid assets. 12864-10_CH10_3rdPgs.indd 232 3/23/12 11:57 AM paying to save 233 We argue that the relationship between an individual’s portfolio allocation and withholding preference is consistent with models with present-biased preferences but not with standard explanations.

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Income is highly correlated with the number and type of assets a tax filer holds; however, a statistically significant relationship between asset allocation and wanting to overwithhold remains. Beginning in column 6, measures of risk tolerance and time preference are included as controls. The inclusion of these control variables sheds light on whether the heterogeneity in wanting to overwithhold across the portfolio allocation groups proxies for their differences in risk tolerance and time preference. If, for instance, those with mainly illiquid assets are more risk averse, then they may have a stronger preference for overwithholding to avoid owing taxes and penalties.

The Four Pillars of Investing: Lessons for Building a Winning Portfolio
by William J. Bernstein
Published 26 Apr 2002

The key point is this: the choice between stocks and bonds is not an either/or problem. Instead, the vital first step in portfolio strategy is to assess your risk tolerance. This will, in turn, determine your overall balance between risky and riskless assets—that is, between stocks and short-term bonds and bills. Many investors start at the opposite end of the problem—by deciding upon the amount of return they require to meet their retirement, educational, life style, or housing goals. This is a mistake. If your portfolio risk exceeds your tolerance for loss, there is a high likelihood that you will abandon your plan when the going gets rough. That is not to say that your return requirements are immaterial.

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First he takes a look at Figures 4-1 through 4-5. Being an analytical type, he comes up with a table that relates his risk tolerance to his overall stock allocation. This is shown in Table 13-7. Take a good look at it. Realize that this is only a starting point. Have you ever actually lost 25% of your assets? It is one thing to think about it, and quite another to actually have it happen to you. (Remember the aircraft-simulator crash versus real-aircraft crash analogy mentioned earlier.) The classic beginner’s mistake is to overestimate his risk tolerance, then decamp forever from stocks when the inevitable loss hurts more than he had ever expected.

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The major stock asset classes you should own are domestic, foreign, and REITs. You may further break the domestic portion into the “four corners”: large market, small market, large value, and small value. 2. Your overall stock/bond allocation is determined by your time horizon, risk tolerance, and tax structure. Since stock and bond returns may be quite similar in the future, you should hold at least 20% in bonds, no matter how risk tolerant you think you are. 3. The stock and bond asset classes you employ are primarily dictated by the percentage of your portfolio that is tax-sheltered. 4. The easiest asset structures to design are those where more than half of assets are tax-sheltered. 5.

On the Edge: The Art of Risking Everything
by Nate Silver
Published 12 Aug 2024

Winning money feels good, feeling as though you’ve outsmarted an opponent feels good, and when the two coincide, your brain is literally flooded with dopamine. It’s no surprise that people chase the rush, sometimes to their own demise. Finally, I put risk tolerance in this cluster because—whether they’re degens or nits in other parts of their lives—being willing to break from the herd and go against the consensus is certainly not the safest professional path. Entrepreneurs usually have high levels of openness to experience and low levels of neuroticism, the “Big Five” personality traits that correlate best with risk tolerance. The River vs. the Village There’s also another community that competes with the River for power and influence.

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Foxes aren’t necessarily risk-loving as an economist would define that term, meaning people who would deliberately make a neutral EV gamble just for the thrill of the chase. But foxes are good at measuring risk, and people who are good at measuring risk tend to be fairly risk-tolerant. They can at least get themselves to make the positive EV bets. So here’s my theory of the secret to Silicon Valley’s success. It marries risk-tolerant VCs like Moritz with risk-ignorant founders like Musk: a perfect pairing of foxes and hedgehogs. The founders may take risks that are in some sense irrational, not because the payoff isn’t there but because of diminishing marginal returns.

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L., 72–73 Mickelson, Phil, 197n middle (sports betting), 489 Midriver, 21, 489 Miller, Ed, 134–35, 172, 177n, 186 mimetic desire, 330–31, 489 See also conformity Mindlin, Ivan “Doc,” 195 mining (crypto), 489 misclick, 489 misogyny, 68, 118–19 Mitchell, Melanie, 450, 459 mixed strategies, 58, 60, 63, 425–26, 490 Mizuhara, Ippei, 173 model mavericks/model mediators, 446–47, 490 models abstract thinking and, 23 AI existential risk and, 446–48 vs. algorithms, 478 defined, 490 sports betting and, 179–80, 182 Moneyball, 137, 145, 153, 171, 179–80, 489 moneylines (sports betting), 183, 490 Moneymaker, Chris, 12, 43, 68, 493 Monnette, John, 103–4 moral hazard, 30, 261, 490 moral philosophy consequentialism, 359, 481, 533n deontology, 359, 368, 481, 482 game theory and, 367–68 impartiality, 358–59, 360–61, 366–67, 368, 377, 487, 533n, 538n modern value proposal, 469–72 moral parliament, 364, 470 overfitting/underfitting and, 362–68 rationality, 372–73, 495 River-Village conflict and, 30–31 See also effective altruism; rationalism; utilitarianism Morgenstern, Oskar, 22, 50–51 Moritz, Michael, 247, 248, 258, 259, 265–66, 271 Moskovitz, Dustin, 338–39 Motte-and-bailey fallacy, 490 “move fast and break things,” 250, 270, 419, 490 Mowshowitz, Zvi, 370 Murray, John, 174, 177, 208 Musk, Elon AI existential risk and, 406n, 416 Sam Altman and, 406 autism and, 282, 284 competitiveness and, 25–26 cryptocurrency and, 314–15 cults of personality and, 31 culture wars and, 29 effective altruism and, 344 luck and, 278, 280 megalothymia and, 468 OpenAI founding and, 406 poker and, 251 politics and, 267n resentment and, 277, 278 risk tolerance and, 229, 247–48, 251, 252, 264–65, 299 River and, 299 River-Village conflict and, 26–27, 267n, 295 secular stagnation and, 467 mutually assured destruction (MAD), 58, 421, 424–27, 488, 490 N Nakamoto, Satoshi, 322–23, 496 narcissism, 274–75 Nash equilibrium defined, 47, 490 dominant strategies and, 55 everyday randomization and, 64 in poker, 57–58, 60, 61, 62 prisoner’s dilemma as, 54 reciprocity and, 471 in sports betting, 58–60, 508n Negreanu, Daniel, 48–49, 66–67, 99, 100, 239, 508n nerd-sniping, 490 networking, 191, 197, 333 Neumann, Adam, 30, 281, 282, 283 neural net, 433–34, 490 New York Times, The, 27, 295 Neymar, 18, 82–83 NFTs, 325–26 apeing, 480 Bored Apes, 480 bubble in, 311, 312 DAOs and, 307 defined, 325, 490 focal points and, 330–34 profitability of, 331–32, 530n nits (gambling), 9, 114, 482, 490 Nitsche, Dominik, 49 nodes, 490 normal distribution, 491 nosebleed gambling, 491 NOT INVESTMENT ADVICE, 491 Noyce, Robert, 257 NPC (nonplayer character) syndrome, 378–79, 490 nuclear existential risk, 407, 420–30 Bayesian reasoning on, 423 game theory and, 58, 328, 420–21, 424, 426, 483 Kelly criterion and, 408–9 mutually assured destruction and, 58, 421, 424–27, 488, 490 nuclear proliferation and, 421, 540n odds of, 422–24 rationality and, 427–28 societal institutions and, 250, 456 stability-instability paradox and, 425 technological Richter scale and, 449 nuts (poker), 491 O Obama, Barack, 267 Occam’s razor, 491 Ocean’s 11, 142 Ohtani, Shohai, 173 Old Man Coffee (OMC), 491 O’Leary, Kevin, 301 “Ones Who Walk Away from Omelas, The” (Le Guin), 454n OpenAI AI breakthrough and, 415 attempt to fire Altman, 408, 411, 452n founding of, 406–7, 414 River-Village conflict and, 27 Oppenheimer, Robert, 407, 421, 425 optimism, 407–8, 413–14, 539n See also “Techno-Optimist Manifesto” optionality, 76–77, 99n, 116, 470, 491 options trading, 318–21 Ord, Toby, 352, 369–70, 380, 443 order of magnitude, 491 originating (sports betting), 491 orthogonality thesis, 418, 491 Oster, Emily, 348–49 outliers, 491 outs (poker), 491 outside view, 492 overbet (poker), 492 overdetermined, 492 overfitting/underfitting, 361, 361, 362–68, 492 P p(doom), 369, 372, 375–76, 380, 401, 408–9, 412, 416, 419, 442, 444–46, 455, 458, 492 See also existential risk Page, Larry, 259, 406 Palihapitiya, Chamath, 272, 277, 280 paper clip thought experiment, 372, 402, 418, 442, 487, 491 parameters, 491 Pareto optimal solutions, 492 Parfit, Derek, 364–65, 443–44n, 495 parlay, 492 Pascal, Blaise, 22, 457n, 492 Pascal’s Mugging, 22, 457n, 492 Pascal’s Wager, 457n, 492 patience, 258, 259, 260 payoff matrix, 492 Peabody, Rufus, 178–80, 181, 182–83, 191, 193, 195, 204, 517n Pepe, 492 Perkins, Bill, 374–75 Persinger, LoriAnn, 118 Petrov, Stanislav, 424, 426 p-hacking, 492 physical risk-takers, 217–21 Piper, Kelsey, 505n pips, 492 pit boss, 493 pits, 493 See also table games plurality, 470–71, 493 plus EV, 493 See also EV maximizing pocket pair, 41, 493 point-spread betting, 183–84, 493 poker abstract thinking and, 23–24 abuse and, 118 AI and, 40, 46–48, 60–61, 430–33, 437, 439, 507n asymmetric odds and, 248–49 attention to detail and, 233–34 bluffing, 39–40, 51, 70–75, 77, 78, 101, 509n calmness and, 221 cheating, 84, 85–86, 123–24, 126–28, 512n competitiveness and, 112, 118, 120, 243 concrete learning and, 432 corporatization of, 43–44 courage and, 222–23 deception and, 60 degens and nits, 9, 114, 482 edge and, 22, 63, 86 effective altruism and, 347–48, 367 estimation ability and, 237–38 fictional portrayals of, 45, 112, 134, 333, 487 game theory development and, 22, 50–51 game trees in, 61, 508n Garrett-Robbi hand, 80–86, 89, 117, 123–29, 130, 444–45, 512n gender and, 70, 82, 84, 100, 117–19, 511n Hellmuth’s career, 97–100 high-stakes cash games, 83–84, 115, 251–52 innovations in, 45–46 lack of money drive and, 243 language and, 439–40 mixed strategies and, 60, 63, 425–26 models in, 23–24 money and, 108–11, 120–21, 511n Elon Musk’s strategy, 251 origins of, 40 personality and, 111–17, 129–30 PokerGO studio, 48–49 post-oak bluffing, 64–65 prediction markets and, 370–71 preparation and, 233 prisoner’s dilemma and, 56–57, 508n privilege and, 82–83, 120–21 probabilistic thinking and, 41, 104–5, 127, 154n, 237 process-oriented thinking and, 226–27 race and, 118, 120, 121–22 raise-or-fold attitude and, 229–30 randomization and, 57–58, 63 regulation of, 13 scientific approach to, 41, 42–43 strategic empathy and, 225 tells, 7–8, 88, 99–104, 118, 233–34, 238, 437, 498 tournaments, 6, 7–8, 56, 154n, 503n variance and, 105, 106–11, 112 See also exploitative strategies; risk impact; solvers (poker); World Series of Poker Poker Boom (2004–2007), 12–13, 68, 315, 493 PokerGO studio, 48–49, 73, 77 polarized vs. condensed ranges (poker), 493 politics, 14–17 AI existential risk and, 458, 541n analytics and, 254 contrarianism and, 242, 254n decoupling and, 25, 27 effective altruism/rationalism and, 377–78 election forecasting, 13–14, 16–17, 27, 137, 182n, 433, 448n EV maximizing and, 14–15 expertise and, 272 gambling and, 17, 504n NFTs and, 326 prediction markets and, 373, 374–75, 535n probabilistic thinking and, 15, 17 reference classes and, 448n River-Village conflict and, 27–28, 29, 30, 267–68, 271, 505–6n SBF and, 26, 341n, 342 Village and, 26, 267–68, 271 Polk, Doug, 65–67 polymaths, 493 See also fox/hedgehog model Ponzi schemes, 309, 337, 493 Population Bomb, The (Ehrlich), 412n, 463 Porter, Jontay, 173, 177 position (poker), 493 posthumanism, 499 Postle, Mike, 84 post-oak bluffing, 64–65 pot-committed (poker), 493 Pot-Limit Omaha (PLO), 487, 493 Poundstone, William, 396 Power Law, The (Mallaby), 286 precautionary principle, 493 Precipice, The (Ord), 369–70, 443 prediction markets, 369–75, 380, 493, 535n preflop (poker), 41, 493 preparation, 232–33 price discovery, 493 priors, 493–94; see also Bayes’ theorem prisoner’s dilemma, 52–57 AI existential risk and, 417 arms race and, 478 cryptocurrency and, 315–18 defined, 494, 507–8n dominant strategies and, 54–55 poker and, 56–57, 508n reciprocity and, 367–68 regulation and, 144 sports betting and, 205 trust and, 472 updated version of, 52–54, 53 probabilistic thinking AI and, 439 AI existential risk and, 445–46 asymmetric odds and, 255 vs. determinism, 253–55, 264, 482 distribution, 9, 491 effective altruism and, 367 importance of, 15–16 poker and, 41, 104–5, 127, 154n, 237 politics and, 15, 17 prediction markets, 369–75, 493, 535n slots and, 153–55, 155 sports betting and, 16–17 theory invention, 22 See also EV maximizing probability distribution, 494 process-oriented thinking, 180, 226–27, 495 Professional Blackjack (Wong), 136 progress studies, 494 prop bets, 180, 182–83, 494 prospect theory, 428n, 494 provenance, 494 public (sports betting), 494 pump-and-dump, 494 punt (poker), 494 pure strategy, 59, 494 push (sports betting), 494 pushing the button, 494 See also existential risk Putin, Vladimir, 421–22, 424, 425 put options, 480 Q quantification, 345–51, 352, 359–60, 364 quants, 494 quantum mechanics, 253n Quit (Duke), 90, 230 Qureshi, Haseeb, 338 R Rabois, Keith, 284–85, 286–87 race casinos and, 135–36, 513n poker and, 118, 120, 121–22 River and, 29, 506n VC discrimination and, 287–90 Rain Man, 136 raise-or-fold situation, 229–31, 494 rake (casino poker), 494 Ralston, Jon, 147 randomization, 57–58, 59–60, 63, 64, 426, 438, 494 See also variance range (poker), 494 rationalism AI existential risk and, 21, 457 defined, 352–53, 354, 495 effective hedonism and, 376 futurism and, 379 impartiality and, 377 politics and, 17, 377–78 prediction markets and, 369, 372–73, 380 River and, 343 tech sector and, 21 Upriver and, 20 utilitarianism and, 364 varying streams of, 355–56, 356, 380–81, 533n wealthy elites and, 344 rationality, 17, 54, 372–73, 427–28, 495 Rawls, John, 364 Ray, John J., III, 301–2, 303 rec (recreational) players, 495 reciprocity, 130, 367–68, 471–72, 495 reference classes, 448, 450, 452, 457, 495 regression analysis, 23, 495 regulation AI, 270, 458, 541n casinos, 134, 135, 143–44, 157, 513n, 514n poker and, 13 River-Village conflict and, 31 Silicon Valley, 269–70, 272 regulatory capture, 31, 269, 270, 495 reinforcement learning from human feedback (RLHF), 440–41, 442, 495 Reinkemeier, Tobias, 102–3 replication crisis, 179, 497 Repugnant Conclusion, 364–65, 403, 495 resilience, 116–17 results-oriented thinking, 495 retail bookmakers, 186–90, 187, 489, 518n return on investment (ROI), 477, 495 revealed preference, 495 revenge, 428–30 Rhodes, Richard, 418n, 496 risk aversion, 137, 268, 277, 427–28, 495 risk ignorance, 247–48, 264, 265, 266 risk impact, 87–97 attention to detail and, 235 Coates on, 89–91, 125 flow state and, 88, 93–94, 95, 126 Garrett-Robbi hand and, 125–26 sports and, 94 tells and, 88 Tendler on, 91–94, 125 risk-loving disposition, 495 risk-neutral disposition, 495 risk of ruin, 495 risk-taker attributes, 23–26, 217–18, 221–43 adaptability, 235–37 asymmetric odds, 248, 259, 260–62 attention to detail, 233–35 calmness, 221–22 courage, 222–24 estimation ability, 237–38 fragile ego, 223 independence, 31, 239–40, 249, 268 lack of money drive, 242–43 patience, 258, 259–60, 260 preparation, 232–33 process-oriented thinking, 226–27, 495 raise-or-fold attitude, 229–31 resentment and, 223, 277 risk tolerance, 26, 30, 227–29 strategic empathy, 224–25 venture capital and, 248–49 See also contrarianism risk tolerance consequences and, 30 COVID-19 and, 6–7, 8–9, 10, 10 decision science on, 427–28 degens and nits, 9, 114, 482 founders and, 247–48, 251, 252, 264–65, 337, 403 gender and, 120 insufficiency of, 90 life expectancy and, 10–11 luck and, 116 Elon Musk and, 229, 247–48, 251, 252, 264–65, 299 poker and, 113–14 as River attribute, 26, 30, 227–29 River-Village conflict and, 29, 30 SBF and, 334–35, 397–403, 537–38n slots and, 168 sports betting and, 179, 196 statistical distribution and, 9 table games and, 165–66 venture capital and, 249, 264 Village and, 137 See also physical risk-takers River, the Archipelago, 22, 310, 478 autism and, 282–84, 525n collegiality within, 249–50 concrete learning and, 432n cultural domination of, 137–38 decoupling and, 24–25, 26, 27, 352, 505n defined, 495 demographics of, 29, 506n effective altruism and, 343 fictional portrayals of, 112 gender and, 29, 117, 506n Las Vegas veneration of, 139 map of, 18, 19, 20–26 megalothymia and, 468 name of, 18, 42, 504n obsession and, 196 prediction markets and, 371–72, 493 process-oriented thinking and, 495 quantification and, 352 race and, 29, 506n rationalism and, 343 SBF’s presence in, 299 self-awareness and, 417 venture capital and, 249–50 See also risk-taker attributes; River-Village conflict river (poker), 42, 495 River-Village conflict, 26–31 culture wars and, 29, 272–73 decoupling and, 27, 482 higher education and, 294–96 moral hazard and, 30 moral philosophy and, 30–31 politics and, 27–28, 29, 30, 267–68, 271, 505–6n regulatory capture and, 31, 269 risk aversion and, 493 Silicon Valley and, 26, 267–75, 290, 295, 505n RLHF (reinforcement learning from human feedback), 440–41, 442, 495 Robins, Jason, 184, 186 robustness, 495 Rock, Arthur, 257, 296 rock paper scissors, 47, 58 Roffman, Marvin, 151 Rogers, Kenny, 229 roon, 410–13, 417, 442, 443, 452, 459–60, 501, 539n Rounders, 45, 112, 134, 333, 487 Rousseau, Jean-Jacques, 54 Roxborough, Roxy, 178 rug pull (crypto), 496 rule utilitarianism, 368, 500 Rumbolz, Mike, 138, 142, 153, 167, 186 running good/rungood, 496 Russell, Stuart, 441 Russian roulette, 496 r/wallstreetbets, 314–15, 317–18, 321, 411, 489, 496 Ryder, Nick, 415n, 430–31, 433, 479 S Sagan, Scott, 425, 426 Sagbigsal, Bryan, 127 Saltz, Jerry, 329, 331n, 484 sample size, 496 sampling error, 489 Sassoon, Danielle, 401 Satoshi (cryptocurrency), 496 SBF.

Die With Zero: Getting All You Can From Your Money and Your Life
by Bill Perkins
Published 27 Jul 2020

But if you don’t want to have wasted five years’ worth of savings in case you do die as expected at 85, you can eliminate that waste (and live a little better between now and then) by saving a little less—as long as you’re okay with the risk. I am not telling you which way is right: Risk tolerance is a singular and personal preference. But I do want you to know that there is a big difference between thinking about your risk tolerance and acting out of blind fear. So it’s fine to look at your life expectancy, to consider your risk tolerance, and to do the math to figure out how many years you need to save for. But that’s not the same as being so frightened of outliving your money—or of the thought of death—that you avoid even looking at the numbers.

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But what I am saying is that there exist solutions to the problem of how to die with zero without running out of money, and you’d be doing yourself a disservice if you didn’t at least look into them. Again, remember that the goal is to eliminate as much waste as possible. How close you get to that goal depends on your own risk tolerance. If you have a very low tolerance for risk—meaning you will not accept even a tiny chance of outliving your money—you will either buy an annuity or you will self-insure by leaving a huge cushion. The odds that you will live to be 123 are currently very low. (The oldest person on record died when she was 122 years and 164 days.)

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In fact, her mother—my grandmother—was even more fearful. I’ll never forget what my mom said to me when I made my first million dollars. “Don’t tell your grandmother,” she told me, “because all she’s going to do is worry about you losing it.” So I get how your upbringing can make you want to play it safe. People naturally vary in their risk tolerance, and that’s okay. I’m not going to tell you how much risk you should take on. But I will add this: First, whatever level of risk you’re comfortable with, whatever bold moves you might contemplate for your life, you’re generally better off making those moves earlier in your life. Again, that’s when you have a higher upside and a lower downside.

Site Reliability Engineering: How Google Runs Production Systems
by Betsy Beyer , Chris Jones , Jennifer Petoff and Niall Richard Murphy
Published 15 Apr 2016

This strategy lets us manage the service to a high-level availability objective by looking for, tracking down, and fixing meaningful deviations as they inevitably arise. See Chapter 4 for more details. Risk Tolerance of Services What does it mean to identify the risk tolerance of a service? In a formal environment or in the case of safety-critical systems, the risk tolerance of services is typically built directly into the basic product or service definition. At Google, services’ risk tolerance tends to be less clearly defined. To identify the risk tolerance of a service, SREs must work with the product owners to turn a set of business goals into explicit objectives to which we can engineer.

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Diskerase example, Recommendations focus on reliability, Reliability Is the Fundamental Feature Google's approach to, The Value for Google SRE hierarchy of automation classes, A Hierarchy of Automation Classes recommendations for enacting, Recommendations specialized application of, The Inclination to Specialize use cases for, The Use Cases for Automation-A Hierarchy of Automation Classes automation tools, Testing Scalable Tools autonomous systems, The Evolution of Automation at Google Auxon case study, Auxon Case Study: Project Background and Problem Space-Our Solution: Intent-Based Capacity Planning, Introduction to Auxon-Introduction to Auxon availability, Indicators, Choosing a Strategy for Superior Data Integrity(see also service availability) availability table, Availability Table B B4 network, Hardware backend servers, Our Software Infrastructure, Load Balancing in the Datacenter backends, fake, Production Probes backups (see data integrity) Bandwidth Enforcer (BwE), Networking barrier tools, Testing Scalable Tools, Testing Disaster, Distributed Coordination and Locking Services batch processing pipelines, First Layer: Soft Deletion batching, Eliminate Batch Load, Batching, Drawbacks of Periodic Pipelines in Distributed Environments Bazel, Building best practicescapacity planning, Capacity Planning for change management, Change Management error budgets, Error Budgets failures, Fail Sanely feedback, Introducing a Postmortem Culture for incident management, In Summary monitoring, Monitoring overloads and failure, Overloads and Failure postmortems, Google’s Postmortem Philosophy-Collaborate and Share Knowledge, Postmortems reward systems, Introducing a Postmortem Culture role of release engineers in, The Role of a Release Engineer rollouts, Progressive Rollouts service level objectives, Define SLOs Like a User team building, SRE Teams bibliography, Bibliography Big Data, Origin of the Pipeline Design Pattern Bigtable, Storage, Target level of availability, Bigtable SRE: A Tale of Over-Alerting bimodal latency, Bimodal latency black-box monitoring, Definitions, Black-Box Versus White-Box, Black-Box Monitoring blameless cultures, Google’s Postmortem Philosophy Blaze build tool, Building Blobstore, Storage, Choosing a Strategy for Superior Data Integrity Borg, Hardware-Managing Machines, Borg: Birth of the Warehouse-Scale Computer-Borg: Birth of the Warehouse-Scale Computer, Drawbacks of Periodic Pipelines in Distributed Environments Borg Naming Service (BNS), Managing Machines Borgmon, The Rise of Borgmon-Ten Years On…(see also time-series monitoring) alerting, Monitoring and Alerting, Alerting configuration, Maintaining the Configuration rate() function, Rule Evaluation rules, Rule Evaluation-Rule Evaluation sharding, Sharding the Monitoring Topology timeseries arena, Storage in the Time-Series Arena vectors, Labels and Vectors-Labels and Vectors break-glass mechanisms, Expect Testing Fail build environments, Creating a Test and Build Environment business continuity, Ensuring Business Continuity Byzantine failures, How Distributed Consensus Works, Number of Replicas C campuses, Hardware canarying, Motivation for Error Budgets, What we learned, Canary test, Gradual and Staged Rollouts CAP theorem, Managing Critical State: Distributed Consensus for Reliability CAPA (corrective and preventative action), Postmortem Culture capacity planningapproaches to, Practices best practices for, Capacity Planning Diskerase example, Recommendations distributed consensus systems and, Capacity and Load Balancing drawbacks of "queries per second", The Pitfalls of “Queries per Second” drawbacks of traditional plans, Brittle by nature further reading on, Practices intent-based (see intent-based capacity planning) mandatory steps for, Demand Forecasting and Capacity Planning preventing server overload with, Preventing Server Overload product launches and, Capacity Planning traditional approach to, Traditional Capacity Planning cascading failuresaddressing, Immediate Steps to Address Cascading Failures-Eliminate Bad Traffic causes of, Causes of Cascading Failures and Designing to Avoid Them-Service Unavailability defined, Addressing Cascading Failures, Capacity and Load Balancing factors triggering, Triggering Conditions for Cascading Failures overview of, Closing Remarks preventing server overload, Preventing Server Overload-Always Go Downward in the Stack testing for, Testing for Cascading Failures-Test Noncritical Backends(see also overload handling) change management, Change Management(see also automation) change-induced emergencies, Change-Induced Emergency-What we learned changelists (CLs), Our Development Environment Chaos Monkey, Testing Disaster checkpoint state, Testing Disaster cherry picking tactic, Hermetic Builds Chubby lock service, Lock Service, System Architecture Patterns for Distributed Consensusplanned outage, Objectives, SLOs Set Expectations client tasks, Load Balancing in the Datacenter client-side throttling, Client-Side Throttling clients, Our Software Infrastructure clock drift, Managing Critical State: Distributed Consensus for Reliability Clos network fabric, Hardware cloud environmentdata integrity strategies, Choosing a Strategy for Superior Data Integrity, Challenges faced by cloud developers definition of data integrity in, Data Integrity’s Strict Requirements evolution of applications in, Choosing a Strategy for Superior Data Integrity technical challenges of, Requirements of the Cloud Environment in Perspective clustersapplying automation to turnups, Soothing the Pain: Applying Automation to Cluster Turnups-Service-Oriented Cluster-Turnup cluster management solution, Drawbacks of Periodic Pipelines in Distributed Environments defined, Hardware code samples, Using Code Examples cognitive flow state, Cognitive Flow State cold caching, Slow Startup and Cold Caching colocation facilities (colos), Recommendations Colossus, Storage command posts, A Recognized Command Post communication and collaborationblameless postmortems, Collaborate and Share Knowledge case studies, Case Study of Collaboration in SRE: Viceroy-Case Study: Migrating DFP to F1 importance of, Conclusion with Outalator, Reporting and communication outside SRE team, Collaboration Outside SRE position of SRE in Google, Communication and Collaboration in SRE production meetings (see production meetings) within SRE team, Collaboration within SRE company-wide resilience testing, Practices compensation structure, Compensation computational optimization, Our Solution: Intent-Based Capacity Planning configuration management, Configuration Management, Change-Induced Emergency, Integration, Process Updates configuration tests, Configuration test consensus algorithmsEgalitarian Paxos, Stable Leaders Fast Paxos, Reasoning About Performance: Fast Paxos, The Use of Paxos improving performance of, Distributed Consensus Performance Multi-Paxos, Disk Access Paxos, How Distributed Consensus Works, Disk Access Raft, Multi-Paxos: Detailed Message Flow, Stable Leaders Zab, Stable Leaders(see also distributed consensus systems) consistencyeventual, Managing Critical State: Distributed Consensus for Reliability through automation, Consistency consistent hashing, Load Balancing at the Virtual IP Address constraints, Laborious and imprecise Consul, System Architecture Patterns for Distributed Consensus consumer services, identifying risk tolerance of, Identifying the Risk Tolerance of Consumer Services-Other service metrics continuous build and deploymentBlaze build tool, Building branching, Branching build targets, Building configuration management, Configuration Management deployment, Deployment packaging, Packaging Rapid release system, Continuous Build and Deployment, Rapid testing, Testing typical release process, Rapid contributors, Acknowledgments-Acknowledgments coroutines, Origin of the Pipeline Design Pattern corporate network security, Practices correctness guarantees, Workflow Correctness Guarantees correlation vs. causation, Theory costsavailability targets and, Cost, Cost direct, The Sysadmin Approach to Service Management of failing to embrace risk, Managing Risk indirect, The Sysadmin Approach to Service Management of sysadmin management approach, The Sysadmin Approach to Service Management CPU consumption, The Pitfalls of “Queries per Second”, CPU, Overload Behavior and Load Tests crash-fail vs. crash-recover algorithms, How Distributed Consensus Works cronat large scale, Running Large Cron building at Google, Building Cron at Google-Running Large Cron idempotency, Cron Jobs and Idempotency large-scale deployment of, Cron at Large Scale leader and followers, The leader overview of, Summary Paxos algorithm and, The Use of Paxos-Storing the State purpose of, Distributed Periodic Scheduling with Cron reliability applications of, Reliability Perspective resolving partial failures, Resolving partial failures storing state, Storing the State tracking cron job state, Tracking the State of Cron Jobs uses for, Cron cross-industry lessonsApollo 8, Preface comparative questions presented, Lessons Learned from Other Industries decision-making skills, Structured and Rational Decision Making-Structured and Rational Decision Making Google's application of, Conclusions industry leaders contributing, Meet Our Industry Veterans key themes addressed, Lessons Learned from Other Industries postmortem culture, Postmortem Culture-Postmortem Culture preparedness and disaster testing, Preparedness and Disaster Testing-Defense in Depth and Breadth repetitive work/operational overhead, Automating Away Repetitive Work and Operational Overhead current state, exposing, Examine D D storage layer, Storage dashboardsbenefits of, Why Monitor?

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decision-making skills, Structured and Rational Decision Making defense in depth, for data integrity, The 24 Combinations of Data Integrity Failure Modes, Sunday, February 27, 2011, late in the evening, Defense in Depth demand forecasting, Demand Forecasting and Capacity Planning dependency hierarchies, Setting Reasonable Expectations for Monitoring, Dependencies among resources deployment, Deployment(see also continuous build and deployment) development environment, Our Development Environment development/ops split, The Sysadmin Approach to Service Management DevOps, Google’s Approach to Service Management: Site Reliability Engineering Direct Server Response (DSR), Load Balancing at the Virtual IP Address disaster recovery tools, Testing Disaster disaster role playing, Disaster Role Playing disaster testing, Preparedness and Disaster Testing-Defense in Depth and BreadthDisaster and Recovery Testing (DiRT), Preparedness and Disaster Testing disk access, Disk Access Diskerase process, Recommendations distractibility, Distractibility distributed consensus systemsbenefits of, Managing Critical State: Distributed Consensus for Reliability coordination, use in, Distributed Coordination and Locking Services deploying, Deploying Distributed Consensus-Based Systems-Quorum composition locking, use in, Managing Critical State: Distributed Consensus for Reliability monitoring, Monitoring Distributed Consensus Systems need for, Managing Critical State: Distributed Consensus for Reliability overview of, Conclusion patterns for, System Architecture Patterns for Distributed Consensus-Reliable Distributed Queuing and Messaging performance of, Distributed Consensus Performance-Disk Access principles, How Distributed Consensus Works quorum composition, Quorum composition quorum leasing technique, Quorum Leases(see also consensus algorithms) distributed periodic scheduling (see cron) DNS (Domain Name System)EDNS0 extension, Load Balancing Using DNS load balancing using, Load Balancing Using DNS-Load Balancing Using DNS DoubleClick for Publishers (DFP), Case Study: Migrating DFP to F1-Case Study: Migrating DFP to F1 drains, Planned Changes, Drains, or Turndowns DTSS communication files, Origin of the Pipeline Design Pattern dueling proposers situation, Multi-Paxos: Detailed Message Flow durability, Indicators E early detection for data integrity, Third Layer: Early Detection(see also data integrity) Early Engagement Model, Evolving the Simple PRR Model: Early Engagement-Disengaging from a service “embarrassingly parallel” algorithms, Trouble Caused By Uneven Work Distribution embedded engineers, Embedding an SRE to Recover from Operational Overload-Conclusion emergency preparedness, Sunday, February 27, 2011, late in the eveningcross-industry lessons, Preparedness and Disaster Testing emergency responsechange-induced emergencies, Change-Induced Emergency-What we learned essential elements of, Emergency Response Five Whys, Ask “what,” “where,” and “why”, Example Postmortem guidelines for, Emergency Response initial response, What to Do When Systems Break lessons learned, Keep a History of Outages overview of, Conclusion process-induced emergencies, Process-Induced Emergency solution availability, All Problems Have Solutions test-induced emergencies, Test-Induced Emergency encapsulation, Load Balancing at the Virtual IP Address endpoints, in debugging, Examine engagements (see SRE engagement model) error budgetsbenefits of, Benefits best practices for, Error Budgets forming, Forming Your Error Budget guidelines for, Pursuing Maximum Change Velocity Without Violating a Service’s SLO motivation for, Motivation for Error Budgets error rates, Indicators, The Four Golden Signals Escalator, Escalator ETL pipelines, Origin of the Pipeline Design Pattern eventual consistency, Managing Critical State: Distributed Consensus for Reliability executor load average, Utilization Signals F failures, best practices for, Fail Sanely(see also cascading failures) fake backends, Production Probes false-positive alerts, Tagging feature flag frameworks, Feature Flag Frameworks file descriptors, File descriptors Five Whys, Ask “what,” “where,” and “why”, Example Postmortem flow control, A Simple Approach to Unhealthy Tasks: Flow Control FLP impossibility result, How Distributed Consensus Works Flume, Challenges with the Periodic Pipeline Pattern fragmentation, Load Balancing at the Virtual IP Address G gated operations, Enforcement of Policies and Procedures Generic Routing Encapsulation (GRE), Load Balancing at the Virtual IP Address GFE (Google Frontend), Life of a Request, Load Balancing in the Datacenter GFS (Google File System), Detecting Inconsistencies with Prodtest, Highly Available Processing Using Leader Election, Extended Infrastructure-Tracking the State of Cron Jobs, Overarching Layer: Replication global overload, Per-Customer Limits Global Software Load Balancer (GSLB), Networking Gmail, Gmail: Predictable, Scriptable Responses from Humans, Gmail—February, 2011: Restore from GTape Google Apps for Work, Target level of availability Google Compute Engine, Indicators Google production environmentbest practices for, Fail Sanely-SRE Teams complexity of, Software Engineering in SRE datacenter topology, Hardware development environment, Our Development Environment hardware, Hardware Shakespeare search service, Shakespeare: A Sample Service-Job and Data Organization software infrastructure, Our Software Infrastructure system software, System Software That “Organizes” the Hardware-Monitoring and Alerting Google Workflow systemas model-view-controller pattern, Workflow as Model-View-Controller Pattern business continuity and, Ensuring Business Continuity correctness guarantees, Workflow Correctness Guarantees development of, Introduction to Google Workflow stages of execution in, Stages of Execution in Workflow graceful degradation, Load Shedding and Graceful Degradation GTape, Gmail—February, 2011: Restore from GTape H Hadoop Distributed File System (HDFS), Storage handoffs, Clear, Live Handoff “hanging chunk” problem, Trouble Caused By Uneven Work Distribution hardwaremanaging failures, System Software That “Organizes” the Hardware software that “organizes”, System Software That “Organizes” the Hardware-Monitoring and Alerting terminology used for, Hardware health checks, Stop Health Check Failures/Deaths healthcare.gov, Practices hermetic builds, Hermetic Builds hierarchical quorums, Quorum composition high-velocity approach, Principles, High Velocity hotspotting, Picking the Right Subset I idempotent operations, Resolving Inconsistencies Idempotently, Cron Jobs and Idempotency incident managementbest practices for, In Summary effective, Managing Incidents formal protocols for, Feeling Safe incident management process, What we learned, Elements of Incident Management Process incident response, Practices managed incident example, A Managed Incident roles, Recursive Separation of Responsibilities template for, Example Incident State Document unmanaged incident example, Unmanaged Incidents when to declare an incident, When to Declare an Incident infrastructure servicesidentifying risk tolerance of, Identifying the Risk Tolerance of Infrastructure Services improved SRE through automation, Faster Action integration proposals, Enforcement of Policies and Procedures integration tests, Integration tests, Integration intent-based capacity planningAuxon implementation, Introduction to Auxon-Introduction to Auxon basic premise of, Our Solution: Intent-Based Capacity Planning benefits of, Our Solution: Intent-Based Capacity Planning defined, Intent-Based Capacity Planning deploying approximation, Approximation driving adoption of, Raising Awareness and Driving Adoption-Designing at the right level precursors to intent, Precursors to Intent requirements and implementation, Requirements and Implementation: Successes and Lessons Learned selecting intent level, Intent-Based Capacity Planning team dynamics, Team Dynamics interruptscognitive flow state and, Cognitive Flow State dealing with, Dealing with Interrupts dealing with high volumes, General suggestions determining approach to handling, Factors in Determining How Interrupts Are Handled distractibility and, Distractibility managing operational load, Managing Operational Load on-call engineers and, On-call ongoing responsibilities, Ongoing responsibilities polarizing time, Polarizing time reducing, Reducing Interrupts ticket assignments, Tickets IRC (Internet Relay Chat), A Recognized Command Post J jobs, Managing Machines Jupiter network fabric, Hardware L labelsets, Labels and Vectors lame duck state, A Robust Approach to Unhealthy Tasks: Lame Duck State latencydefined, Choosing a Strategy for Superior Data Integrity measuring, Indicators monitoring for, The Four Golden Signals launch coordinationchecklist, The Launch Checklist-Example action items, Launch Coordination Checklist engineering (LCE), Launch Coordination Engineering, Development of LCE-Infrastructure churn(see also product launches) lazy deletion, The 24 Combinations of Data Integrity Failure Modes leader election, Managing Critical State: Distributed Consensus for Reliability, Highly Available Processing Using Leader Election lease systems, Reliable Distributed Queuing and Messaging Least-Loaded Round Robin policy, Least-Loaded Round Robin level of service, Service Level Objectives(see also service level objectives (SLOs)) living incident documents, Live Incident State Document load balancingdatacenterdatacenter services and tasks, Load Balancing in the Datacenter flow control, A Simple Approach to Unhealthy Tasks: Flow Control Google's application of, Load Balancing in the Datacenter handling overload, Handling Overload ideal CPU usage, The Ideal Case, The Pitfalls of “Queries per Second” lame duck state, A Robust Approach to Unhealthy Tasks: Lame Duck State limiting connections pools, Limiting the Connections Pool with Subsetting-A Subset Selection Algorithm: Deterministic Subsetting packet encapsulation, Load Balancing at the Virtual IP Address policies for, Load Balancing Policies-Weighted Round Robin SRE software engineering dynamics, Team Dynamics distributed consensus systems and, Capacity and Load Balancing frontendoptimal solutions for, Power Isn’t the Answer using DNS, Load Balancing Using DNS-Load Balancing Using DNS virtual IP addresses (VIPs), Load Balancing at the Virtual IP Address policyLeast-Loaded Round Robin, Least-Loaded Round Robin Round Robin, Simple Round Robin Weighted Round Robin, Weighted Round Robin load shedding, Load Shedding and Graceful Degradation load tests, Overload Behavior and Load Tests lock services, Lock Service, Distributed Coordination and Locking Services logging, Examine Lustre, Storage M machinesdefined, Hardware, Definitions managing with software, Managing Machines majority quorums, Number of Replicas MapReduce, Challenges with the Periodic Pipeline Pattern mean timebetween failures (MTBF), Testing for Reliability, Expect Testing Fail to failure (MTTF), Emergency Response to repair (MTTR), Emergency Response, Faster Repairs, Testing for Reliability memory exhaustion, Memory Mencius algorithm, Stable Leaders meta-software, The Use Cases for Automation Midas Package Manager (MPM), Packaging model-view-controller pattern, Workflow as Model-View-Controller Pattern modularity, Modularity Moiré load pattern in pipelines, Moiré Load Pattern monitoring distributed systemsavoiding complexity in, As Simple as Possible, No Simpler benefits of monitoring, Why Monitor?

Retirementology: Rethinking the American Dream in a New Economy
by Gregory Brandon Salsbury
Published 15 Mar 2010

For example, if we assume this individual had invested $500,000, he would need a rate of return of 10% each year to meet his retirement objectives. A 10% rate of return would require a substantially higher level of risk and, most likely, greater volatility. Your risk tolerance and the amount of risk you are willing to take when it comes to your retirement nest egg are important considerations when determining how much you need to invest and when you will retire. So, the less risk you can take to meet your objectives, the more comfortable you may be in meeting them. Understanding your own personal objectives and risk tolerance will help you overcome the desire to herd with the masses. Set Long-Term Financial Goals The achievement of any goal requires a plan.

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Here are ten essential questions to ask yourself before reading this book: 1. When did you retire or when do you NOW expect to retire? 2. What role do you envision your house playing in your retirement? 3. What changes in your household spending if any do you think make sense today? 4. Do you believe your risk tolerance has changed in the last 18 months? 5. Do you think the likelihood of having to financially support extended family has impacted your retirement? 6. Would you be willing to put away your credit cards and use cash for just one month? 7. What is the lifestyle you expect in retirement--housing, travel, club membership, entertainment, and so on?

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Improve Your Retirementology IQ These are scary times for an investor and for a retiree. But this is not the first time we’ve had an unnerving investment landscape. Understanding some retirement basics is a good start. Rather than following the herd, consider following these fundamental steps. Understand Your Objectives and Assess Your Risk Tolerance You must understand where you are in life, where you want to go with your financial future, and how much risk you are willing to take, or should take, to get you there. There are two key points to understanding your objectives: the anticipated cost of the objective and the timeframe you have to meet your objective.

The Intelligent Asset Allocator: How to Build Your Portfolio to Maximize Returns and Minimize Risk
by William J. Bernstein
Published 12 Oct 2000

This is essentially a recapitulation of the Chapter 5 discussion, except that I’ve changed the order of the steps: 1. Determine your basic allocation between stocks and bonds. First, answer the question, “What is the biggest annual portfolio loss I am willing to tolerate in order to get the highest returns?” Table 8-1 summarizes the process of determining your risk tolerance. In previous versions of the book, I allowed the most risk-tolerant investors 100% equity exposure. At the present time, however, it appears that expected stock and bond returns going forward may not be all that different, and a dollop of bonds is recommended for all investors. The percentage stock recommendations in Table 8-1 will need to be revised downward depending on your time horizon.

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Learn about the risk/reward characteristics of various specific investment types. 4. Appreciate that diversified portfolios behave very differently than the individual assets in them, in much the same way that a cake tastes different from shortening, flour, butter, and sugar. This is called portfolio theory and is critical to your future success. 5. Estimate how much risk you can tolerate; then learn how to use portfolio theory to construct a portfolio tailored to produce the most return for that amount of risk. 6. At this point you are finally ready to purchase individual stocks, bonds, and mutual funds. If you have succeeded in the above tasks, this is by far the easiest step.

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In fact, the more exotic asset classes you add to your mix, the higher your tracking error will be. Remember, that tracking error does not mean lower returns, it just means that your portfolio will behave very differently from everyone else’s, and that it will often temporarily underperform everybody else’s. Risk Tolerance The third step in the asset allocation process is by far the easiest. You have already done the heavy lifting—deciding what stock asset classes to use, 80 The Intelligent Asset Allocator and in approximately what proportion to use them. Now all you have to determine is the overall mix of stocks and bonds.

I Will Teach You To Be Rich
by Sethi, Ramit
Published 22 Mar 2009

Moves like this don’t bother me as much as they might bother other people (my wife, for example) because my risk tolerance is high. I have twenty or thirty years to go before retirement. That’s two or three decades to recover from any further market drops. Risk and reward go hand in hand. The historically high returns of the stock market are impossible without risk; anyone who tells you otherwise is lying. But not everyone can stomach having all of their investments in stocks and mutual funds. If your risk tolerance is low (if you’re scared of bears), or you’re approaching retirement, it’s best to keep your money someplace safe, such as bond funds or high-yield savings accounts.

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If your risk tolerance is low (if you’re scared of bears), or you’re approaching retirement, it’s best to keep your money someplace safe, such as bond funds or high-yield savings accounts. I keep cash equal to a few months of expenses in savings. I have a friend who is far less risk-tolerant than I am who keeps an entire year of expenses in savings. (Please, if you’re going to set this much money aside, put it into a high-yield savings account or certificates of deposit!) Even if your risk tolerance isn’t all that high, you can still invest in the stock market, even during downturns. Dollar-cost averaging is an excellent way to do this. Dollar-cost averaging simply means making regular, scheduled investments instead of buying into the stock market all at once.

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These funds target roughly the same age—someone in his or her twenties—and assume retirement at age sixty-five. You should pay special attention to the minimum initial investment (it matters if you don’t have a lot of money lying around) and the asset allocation, which will help you determine which fund most suits your risk tolerance. Remember, these are only two example funds; you can choose among many lifecycle funds offered by companies like the ones I list on page 187. The major benefit to a lifecycle fund is that you set it and forget it. You just keep sending money and your fund will handle the allocation, trading, and maintenance, automatically diversifying for you.

Investing Demystified: How to Invest Without Speculation and Sleepless Nights
by Lars Kroijer
Published 5 Sep 2013

It really does depend on your circumstances Like most things in investing, allocations are highly subject to individual circumstances and risk tolerance. Figure 10.4 shows how an investor’s allocations may change over his or her life, ignoring the complication of risky government and corporate bonds in the rational portfolio. Figure 10.4 Stages of life: moving from equities as you age Risk surveys As discussed above, getting a handle on your risk tolerances is not only critical in investment management, but also a very individual thing. In my view, far too often investors rely on their gut feelings in deciding on the risk levels in their portfolios, or are guilty of what some call ‘recency’ where we over-emphasise recent events in planning for the future.

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As suggested, they are meant to give you an idea about your risk tolerances, often via stress tests, but in my view risk surveys often leave a lot to be desired. Risk surveys that I have completed are too simplistic to give a really detailed view of your risk profile, often because they don’t ask enough questions about your specific situation. Sometimes I find that the surveys are a prelude to someone trying to sell me a specific ‘tailor-made’ product (read: expensive), instead of objectively trying to help me understand my risk tolerance. In addition, risk surveys often fail to properly incorporate all my other assets and liabilities, including seemingly odd ones like education, inheritance, future tuition for children, or other critical things like what stage of life I’m at regarding career or retirement.

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Table 3.1 The rational portfolio at different risk preferences So someone with £100 to invest and a medium ‘C’ risk profile could do as follows: Allocation Investment £33 UK government bond tracker with maturity matching investor’s time horizon £50 World equity index tracker product £7 Diversified return generating government bonds of varying maturities, countries and currencies, rated sub-AA £10 Broad range of corporate bonds of varying maturity, credit risk, currency, issuer and geography. I will discuss how I came up with the allocations above. Whilst the allocations are not an exact science and therefore do not have to be implemented in exactly the proportions illustrated, you would do very well if you implement your portfolio in a similar manner. Of course our risk tolerances differ. Let’s say that we have $100 now and need $110 in 10 years’ time, and that we invest in the world equity markets where we expect real returns of about 5% a year. If we assume that performance every year will in fact be 5% we know that in 10 years our $100 will have become $162 and be far in excess of what we need.

The End of Indexing: Six Structural Mega-Trends That Threaten Passive Investing
by Niels Jensen
Published 25 Mar 2018

In game theory, and in the context of bargaining, there are four sources of overall power: Economic power. All other things being equal, the greater your economic power is, the greater your overall power is. Nash and Harsanyi labelled it resource endowment. Risk tolerance. The greater your risk tolerance is, relative to the risk tolerance of whoever you are bargaining with, the greater your overall power is. Threat power. In game theory, the greater your threat power is, i.e. your ability to inflict damage on the opposition, the greater your overall power is. Coalition power. In a bargaining situation, if you can gain support from other powers (players in game theory), you boost your own overall power.

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Take Africa – while both Europe and the US have struggled in the aftermath of the Global Financial Crisis, China has roamed freely in Africa, pretty much unchallenged. Looking forward, as people age and demand for social welfare programmes rise, I would fully expect risk tolerance to continue to decline. Domestic challenges will simply reduce the West’s appetite for risk internationally. As a natural consequence of falling risk tolerance, the threat power is also in decline. Under President Obama, the US made an unusually low number of credible threats (ISIS kept them busy), and a very risk-averse Europe made virtually none. Meanwhile, China was busy making credible threats in Asia.

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Exhibit 6.1: Chinese GDP catch-up under various assumptions Annual Chinese GDP Growth 3.00% 5.00% 7.00% Annual US GDP Growth 1.00% 2047 2032 2027 1.50% 2057 2034 2028 2.50% n/a 2041 2030 Source: Absolute Return Partners LLP Other sources of power If the anticipated shift in economic power from West to East is not that many years away, neither may we be far away from a shift in overall power. That view is further reinforced when looking at the other sources of power. Since the Global Financial Crisis, risk tolerance in the West has been in decline. In the US, recent administrations have clearly been more risk-averse than what used to be the case, although President Trump seems to be willing to reverse that trend. European governments, which have been noticeably more risk-averse than US administrations for many years, haven’t exactly picked up the baton left behind by the US under Obama.

How I Invest My Money: Finance Experts Reveal How They Save, Spend, and Invest
by Brian Portnoy and Joshua Brown
Published 17 Nov 2020

I hope to resume HSA savings in future years and build a savings account for future healthcare costs. I invest my retirement and after-tax accounts in the same portfolios I recommend to clients. My mix of stocks and bonds is based on two things: time horizon and risk tolerance. My time horizon is long. I plan to work for at least three more decades, and my children are very young. My risk tolerance is high because I have the benefit of time and because I work in the industry and therefore intimately understand the relationship between risk and return. That does not mean my portfolio is 100% invested in stocks. Instead, I place 80% in stocks and 20% in bonds.

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It’s just what works for us. We do it because cash is the oxygen of independence, and—more importantly—we never want to be forced to sell the stocks we own. We want the probability of facing a huge expense and needing to liquidate stocks to cover it to be as close to zero as possible. Perhaps we just have a lower risk tolerance than others. But everything I’ve learned about personal finance tells me that everyone—without exception—will eventually face a huge expense they did not expect—and they don’t plan for these expenses specifically because they did not expect them. The few people who know the details of our finances ask, “What are you saving for?

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The firm is entirely bootstrapped from day one – no private equity, no debt, no outside investors. This is both strategically and emotionally important to us. My 401(k) is invested in the exact same asset allocation model as we use for our clients. I own the same funds, in the same proportions, that my clients of comparable risk tolerance own. I’m in an all-equity model because I’m relatively young, can bear risk and will not be accessing this capital for at least another 25 years. Every other employee of Ritholtz Wealth is also invested in the same asset allocation models as our clients. This was a very important decision we made early on.

Understanding Asset Allocation: An Intuitive Approach to Maximizing Your Portfolio
by Victor A. Canto
Published 2 Jan 2005

The final element of the cyclical strategy is to forecast the foreign-exchange market. The conviction of this forecast can then be used to tilt a portfolio in favor of the asset class favored by the exchange-rate forecast. How much of the potential gain is captured by this strategy depends on the quality of the forecast and the risk tolerance of the investor. The greater the risk aversion, the less sensitive the tilt around the long-run allocation. This approach suggests a simple way for investors to take advantage of changing conditions over business and economic cycles. Chapter 3 Thinking in Cycles 65 This page intentionally left blank 4 TAX TIPS 67 T he corporate story in recent years has been an ugly one.

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The first step uses the asset classes’ historical returns and the variance–covariance matrix to build a combination of the various asset classes that leads one to the efficient frontier. This step also leads an investor to the point where maximum expected returns are reached for a determined risk level. The second step determines risk tolerance so an investor can choose the risk/return combination best suiting his or her preferences. I have two major objections to this process as it is currently practiced. The first objection is simply empirical: How long of a historical sample does one need to determine long-run historical returns and the variance–covariance matrix?

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The efficient market theory tells us that, in an idealized situation, the market portfolio is on the efficient frontier. If this is the case, then all asset classes should be included on the efficient frontier and, therefore, in an economy-wide (or aggregate) SAA portfolio. As it is true individuals differ regarding their risk-tolerances and investment preferences, it follows their individual asset-allocation plans differ from those of the aggregate economy. Investors, however, cannot collectively avoid economy-wide constraints. Ultimately, a weighted average of individual asset allocations must add up to the market allocation.

The Behavioral Investor
by Daniel Crosby
Published 15 Feb 2018

Tyler Durden’s Fight Club rant about the duplicity of airline safety protocols could just as easily be applied to the futile dance of financial advisors giving clients risk tolerance questionnaires. Risk tolerance questionnaires (RTQs) give the illusion of safety and insight, and fly in the face of research that suggests that risk-taking behavior is domain specific, context driven and dynamic. Some academics try to skirt this point through a bit of esoteric sleight of hand that distinguishes risk tolerance from risk perception. Risk tolerance is defined as your static, long-term attitudes about risk, whereas risk perception is the dynamic, contextual piece more likely to fluctuate during periods of market upheaval. Risk tolerance, academics are quick to point out, is unchanging and they have the studies to prove it.

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The results, published in the Proceedings of the National Academy of Sciences, found that participants’ appetite for risk fell by an incredible 44% as a result of the elevated levels of cortisol.26 Formerly thought of as primarily a mental construct, Coates’ findings turned traditional notions of risk tolerance on their head, and painted a more dynamic picture of the interplay between mind and body. As he opines in The Biology of Risk, “Most models in economics and finance assume that risk preferences are a stable trait, much like your height. But this assumption, as our studies suggest, is misleading.

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Risk tolerance, academics are quick to point out, is unchanging and they have the studies to prove it. Essentially, they say, you can have the right idea at heart about risk-reward tradeoffs (risk tolerance) even as you are engaging in the wrong behavior due to your risk perception in the heat of the moment. This Ivory Tower factoid is of very little practical use to investors who enter and exit the market at all the wrong times or the beleaguered investment advisors who take panicked phone calls from their clients. In the end, risk-taking behavior is all that matters and the fact remains that it is changeable and context-dependent.

The Missing Billionaires: A Guide to Better Financial Decisions
by Victor Haghani and James White
Published 27 Aug 2023

When the stock market offers lower expected excess returns, all else equal, it's both good theory and good sense to own less of it. We think there's a fundamental flaw in the prevailing conventional advice given to individuals, in which the investor decides how much risk to take based solely on whether they have a “high” or “low” risk tolerance, without factoring in how much they're being “paid” to take that risk. It would be like deciding to bet the same amount on a biased coin regardless of whether it's 70/30 in your favor or fair at 50/50. An even more perverse approach would be to bet more when the coin toss is less in your favor, thinking that you need to make up for the low expected returns by taking extra risk.

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Readers shouldn't feel like they have to pick a side in the somewhat unfortunate “Kelly versus Utility” debate—for the kinds of problems where the original Kelly criterion is readily applied, Kelly and utility are more like close siblings than unrelated brawling adversaries. Some advocates of the Kelly criterion argue that maximizing the expected growth rate of wealth is the only rational approach to sizing risk exposure. However, we have found that strict Kelly betting is far too risk‐tolerant for most individuals. For example, a person with this low level of risk‐aversion would be just willing to accept a 50/50 coin toss to double or halve her wealth. We don't know many people, especially those near the end of their working careers, who would be willing to take such a high chance of losing half of their entire wealth.

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However, economic activity is far from being a zero‐sum game, and the lower risk‐aversion of some individuals can have positive side effects—“externalities” in economic‐speak—on other members of society through their more aggressive risk‐taking in developing new technologies. It is also believed that dispersion in individual risk‐aversion can lead to greater market instability. When the prices of risky assets go down, the most risk‐tolerant investors see their wealth decline more sharply than for everyone else. As a result, the wealth‐weighted average risk‐aversion of the market increases, just when more risk‐capital may be needed to stabilize the market. How Wealth Delivers Utility One of the benefits of using a utility‐centric framework is that it provides some structure for thinking about the big‐picture questions of how to use one's wealth, which are often difficult to tackle otherwise.

The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns
by John C. Bogle
Published 1 Jan 2007

So do your best to diversify to the nth degree, minimize your investment expenses, and focus your emotions where they cannot wreak the kind of havoc that most other investors experience. Rely on your own common sense. Emphasize an S&P 500 Index fund or an all-stock-market index fund. (They’re pretty much the same.) Carefully consider your risk tolerance and the portion of your investments you allocate to equities. Then, stay the course. All index funds are not created equal. Costs to investors vary widely. I should add, importantly, that all index funds are not created equal. Although their index-based portfolios are substantially identical, their costs are anything but identical.

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When You Retire. IN THIS CHAPTER AND the next, we tackle two complex issues: the general principles of asset allocation, and allocation funds specifically designed for your retirement years. These are issues that have no easy answers. Why? First, because we investors have a wide range of investment goals, risk tolerances, and behavioral characteristics. Second, because we’ve had 35 years of extraordinary returns in the stock market and the bond market alike, returns that are highly unlikely to recur in the coming decade. (See Chapter 9, “When the Good Times No Longer Roll.”) Third, authors of books on investing, are, in a real sense, captives of the eras that we have experienced.

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Some investors can handle the ups and downs of the market without worry. But if you can’t sleep at night because you’re frightened about the volatility of your portfolio, you’re probably taking more risk than you can handle. Taken together, your ability to accept risk and your willingness to accept risk constitute your risk tolerance. A basic allocation model for the investor who is accumulating assets, and the investor who is retired. Let’s begin with a basic allocation model for the accumulation of assets for the wealth-building investor. The main points to consider are merely common sense. (1) Investors seeking to accumulate assets by investing regularly can afford to take somewhat more risk—that is, to be more aggressive—than investors who have a relatively fixed pool of capital and are dependent on income and even distributions from their capital to meet their day-to-day living expenses. (2) Younger investors, with more time to let the magic of compounding work for them, can also afford to be more aggressive, while older investors will likely want to steer a more conservative course.

Investing Amid Low Expected Returns: Making the Most When Markets Offer the Least
by Antti Ilmanen
Published 24 Feb 2022

But we must try and estimate what level of portfolio volatility or likely worst losses we can tolerate. Financial advisors have a set of questions to elicit a client's risk tolerance, and the method also applies for institutions. One method is to ask the investor, or an investment committee, to choose between numerical pairs of wealth outcomes or between visual examples of performance and drawdowns.1 Actual experiences may teach us more about our risk tolerance than hypothetical comparisons. Even if most of us feel heightened risk aversion during times like Fall 2008 or March 2020, if we cannot stick with our portfolio through such experiences, we should learn for the future that we held a too risky portfolio.2 Q2: Does the mean-variance framework miss crucially relevant considerations, such as ESG preferences, liquidity needs, or leverage constraints – or even your liabilities?

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Why does one institution ignore liabilities and apply constrained mean-variance optimization on asset allocation, or in extreme simply maximize expected asset returns? Conversely, why does another institution focus on liabilities and apply constrained A-L surplus optimization, or in extreme simply match assets with liabilities (i.e. minimize the surplus volatility)? There are many answers, the first being that the more risk tolerant sponsors choose the former, the more risk averse the latter. Moreover, when the liability is very explicit and binding, a set of fixed payments on a future date, it is likely to lead to liability-driven or surplus-oriented investing. The present value of liabilities also matters: the lower the discount rate that is applied on liabilities, the higher the present value of liabilities and the lower the surplus (A-L) and the funding ratio (A/L).

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Heston-Sadka (2008) report this pattern for individual stocks, while Keloharju-Linnainmaa-Nyberg (2016) find it even stronger in systematic factors and also document it in other asset classes. There has been some debate to what extent this pattern can be explained by information events (say, earnings announcements) and related resolution of uncertainty, seasonal dividend payments, or varying risk tolerance tendencies across the year. Risk taking has been better rewarded on announcement days than other days. This higher reward seems to go beyond just higher risk on such days. Single stocks tend to earn higher returns on the earnings announcement days, as do many style premia and anomalies. Beta risk tends to be rewarded on macroeconomic announcement days (the equity index future performs abnormally well and high-beta stocks outperform low-beta stocks).

925 Ideas to Help You Save Money, Get Out of Debt and Retire a Millionaire So You Can Leave Your Mark on the World
by Devin D. Thorpe
Published 25 Nov 2012

You can now choose a fifth fund to skew your portfolio in the direction that makes you most comfortable. If you are risk tolerant and sleep well knowing your funds go up and down in value, you may want to invest in a risky fund to help increase the yield in your portfolio. There are a variety of specialty funds that make concentrated investments in industries, regions and countries. These funds often beat the market one year and trail it dramatically the next. On the other hand, if you are not risk tolerant or are closer to retirement, you may want to make your final fund a short term government bond fund that invests in bonds with maturities of less than four years so there is very little interest rate risk and virtually no credit risk.

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Cash features ultra-low risk and correspondingly low returns. The goal of asset allocation is to match your risk tolerance, return on investment goals, and investment objectives to your portfolio. For short-term objectives, investing only in cash or in cash and bonds would generally make sense. For long-term objectives, like retirement, investing in a combination of all three would be considered wise. People in their twenties investing for retirement have the flexibility, if they are risk tolerant enough, to be invested 100% in equities. As people age, retirement gets closer and the pain of a major setback in investment returns looms larger so they generally shift the allocation to include more bonds and even a bit of cash.

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Such bonds have no credit risk, that is no risk of not being paid on schedule, but as interest rates change, the value of the bonds will fluctuate. Each of these fund categories would make a good first fund for your retirement savings. They offer high expected returns—compared to what you can earn in a bank account. They are listed in order from most risky to least risky. You can decide which of these three best represents your risk tolerance based on your own situation. Once you’ve decided upon a category, you’ll want to choose an individual fund based primarily on the expenses. Your broker should provide you with a list of mutual funds you can purchase with no transaction fees. You’ll also want to choose a fund that doesn’t charge a “load” or upfront fee.

Capital Allocators: How the World’s Elite Money Managers Lead and Invest
by Ted Seides
Published 23 Mar 2021

Aligning incentives is the most important feature of an external manager relationship, and a manager’s personal investment alongside clients is the most direct form of that alignment. Perspectives differ on the appropriate amount a manager should invest, however most agree that the amount should be substantial and serve to align risk tolerance. Doing so creates an “alignment of appetites” according to Andy Golden at Princeton University Investment Management Company. Probing about a manager’s other personal investments can shed light on their risk tolerance and on other potentially attractive investment opportunities. b. Competitive advantage “What is your superpower?” – Mario Therrien “What is your edge and why is it enduring?”

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.”– Margaret Chen “In order to finish first, you first have to finish.”– Andy Golden “One guy came and pitched me the idea of the endowment buying a cow. A single cow. I said, ‘Sir, you do realize I can’t buy a cow.’ He went away very sad.”– Ellen Ellison “Your risk tolerance has to be the lesser of your own risk tolerance or the asset owner’s.”– David Druley “Emphasize the reflective over the reactive.”– James Aitken Appendices Appendix A: Initial Manager Meeting Outline The following outline is an example of a preparation document for a meeting with a long-short equity hedge fund manager.

Work Optional: Retire Early the Non-Penny-Pinching Way
by Tanja Hester
Published 12 Feb 2019

Magic number = annual spending (minus any pension payments) × inverse of safe withdrawal rate + additional expected expenses Annual spending ($): x SWR (%): SWR Inverse of SWR (100/SWR): 100/SWR Base amount (annual expenses × multiplier) ($): 100x/SWR One-time additional expenses ($): y Ballpark magic number ($): 100x/SWR + y SAMPLE FULL EARLY RETIREMENT SCENARIOS Scenario 1: Low full early retirement annual expenses of $40,000 per year, high risk tolerance, and no other anticipated large future expenses Annual spending ($): 40,000 SWR (%): 4 Inverse of SWR (100/SWR): 25 Base amount (annual expenses × multiplier) ($): 1,000,000 One-time additional expenses ($): — Ballpark magic number ($): 1,000,000 Scenario 2: $50,000 annual expenses, medium risk tolerance, and $60,000 in anticipated kids’ college costs Annual spending ($): 50,000 SWR (%): 3.5 Inverse of SWR (100/SWR): 31.25 Base amount (annual expenses × multiplier) ($): 1,562,500 One-time additional expenses ($): 60,000 Ballpark magic number ($): 1,622,500 Scenario 3: $75,000 annual expenses, low risk tolerance, and $200,000 in anticipated kids’ college costs and support to aging parents Annual spending ($): 75,000 SWR (%): 3 Inverse of SWR (100/SWR): 33.33 Base amount (annual expenses × multiplier) ($): 2,500,000 One-time additional expenses ($): 200,000 Ballpark magic number ($): 2,700,000 For a rental real estate–focused full early retirement, what you’re looking to determine is how much you’ll need to invest in properties to generate the magic money that will support your lifestyle.

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Stay away from investments that promise huge gains out of line with market averages, as those are likely scams or wishful thinking, and aim for investments that match the overall markets. In investing, average is good, just as boring is good. That said, it’s wise to do some introspection to determine how much risk you can tolerate without it stressing you out. If you know that investing your money in higher-risk vehicles will keep you from sleeping well at night, an aggressive investment strategy of 100% stock and stock funds is probably not for you. And conversely, if you don’t mind watching your account balances bob up and down a bit, then a more conservative strategy with a high percentage of bonds and cash wouldn’t suit you very well either.

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And conversely, if you don’t mind watching your account balances bob up and down a bit, then a more conservative strategy with a high percentage of bonds and cash wouldn’t suit you very well either. Every type of asset comes with its own risk profile, and in general, the more an investment stands to gain, the more it also stands to lose. But there are other ways to manage risk tolerance that aren’t strictly focused on which investment vehicles you choose. So keep an open mind as we walk through your investment tool options. In addition to paying attention to risk profiles, fees should be high on your list of things to look out for. Investment fees, which go by names like expense ratios, management fees, loads, sales fees, or trading fees, can quickly erode your portfolio gains if you aren’t careful, even when they seem innocuous.

Trading Risk: Enhanced Profitability Through Risk Control
by Kenneth L. Grant
Published 1 Sep 2004

Each trading account has (explicitly or implicitly) a finite amount of this currency, and it is vital to manage portfolio affairs in such a way that respects this resource constraint. Moreover, while the amount of risk that a given trader can responsibly assume has absolute boundaries (expressed, typically, in financial terms), within these boundaries, it is usually within the control of the individual to set his or her individual risk tolerance at levels that are likely to reach these boundaries or to exceed 1 Browning, in addition to being righteous, was quite prolific. Setting Performance Objectives 27 them by some measure, or to fall somewhere within them. The efficient use of economic stop-outs involves setting your loss-assumption tolerance at manageable levels that will afford you much greater control over the broad and diverse set of circumstances that you are likely to confront over the course of your trading career.

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In particular, I recommend sitting down and performing the same type of review of markets, trading modes, and so on, that a professional institutional trader conducts. Have market conditions improved or worsened? How much time and energy can you devote to trading? Are you set up to maximize information flow and execution efficiency? Once you have answered these questions and applied them through the filter of your risk tolerance, the final piece of the puzzle will in most cases reside in your psyche. You should set your stop-out level at a figure that is large enough for you to feel that you have given your trading a fair shot but that falls short of the point where reaching it becomes demoralizing or debilitating. Whatever figure you finally identify as your largest acceptable loss, the most important thing is to live within this limit and to commit to a full-scale portfolio liquidation if you are unable to prevent this outcome.

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The point here is that by combining information about your Sharpe Ratio with expectations of return, you begin to create a picture of what type of risk levels are appropriate to these objectives; volatility levels significantly below these ranges will almost guarantee a failure to achieve associated targets, whereas figures vastly above these thresholds give rise to potential inconsistencies between return targets and risk tolerances. Method 2: Managing Volatility as a Percentage of Trading Capital As you may have surmised, the Inverted Sharpe Ratio method is best adapted to determining the lower bound of exposure that is consistent with reaching your targeted objectives. The main insight that it will provide you in determining the appropriate associated upper bound is that if your volatility is too high, it will project out a return that far exceeds your objectives.

Traders at Work: How the World's Most Successful Traders Make Their Living in the Markets
by Tim Bourquin and Nicholas Mango
Published 26 Dec 2012

I started doing that “quest” for the Holy Grail, just like every trader does at some point in their trading career. We all begin looking for the magic setup or a magic methodology that will work in all markets and all time frames. Of course, it doesn’t exist, but you still have to find a strategy and method that fits your personal style and risk tolerance. I searched high and low for a good couple of years before I found my current methodology. I really had to work hard to make the switch from trading momentum to trading on a more technical level based on charts. The point is you really need to get more technical to trade FX, because it’s so much more of a chess game than a boxing match with an opponent [the specialist], which is what day trading equities was.

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Foster: It depends on allocation, and for my account versus some of my client accounts, I might be more aggressive. I might use more small caps if I think small caps are looking strong, or I might use a heavier allocation towards small caps because I think I am going to get better performance there than I would with the Dow. It also depends on my risk tolerance at the time. I’m usually pretty aggressive in my trades, but I do factor in current or upcoming events in my personal life and may become more hesitant to take risk under certain conditions. Bourquin: What’s an average option contract size for a trade in your personal account? Foster: I typically only use two contracts at a time, and while I might use multiple contracts in a week, in any one day I only use two contracts at once.

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Not knowing, or simply guessing at, where these price points will be after you have entered a trade can lead to indecision or price targets outside of the average range of the security you are trading. Why set an arbitrary profit target of three points when the average range of that market is only two points? Furthermore, wealthy traders set position sizes and stop losses that are almost always a function of their risk tolerance for any given trade. For example, if the maximum risk on any one trade is 2 percent of their trading account, they will calculate both the number of shares they will trade (based on the price of shares) and a reasonable stop loss before they place the trade. I rarely talk with a wealthy trader who says their position size is 1,000 shares.

Your Money or Your Life: 9 Steps to Transforming Your Relationship With Money and Achieving Financial Independence: Revised and Updated for the 21st Century
by Vicki Robin , Joe Dominguez and Monique Tilford
Published 31 Aug 1992

As an FIer, you don’t want to risk your nest egg. But you are already putting the value of your nest egg at risk if your investment returns don’t at least keep pace with inflation. How exactly do you manage your money to reduce the risks associated with inflation? Risk Tolerance Any financial professional will tell you that it’s important to determine your risk tolerance before making any investments. The spectrum ranges from conservative investors who do not want to risk their capital at all to aggressive ones at the other end of the spectrum who are willing to risk all their capital for the promise of significant returns.

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Waaaaay at the speculative end you’ll find few FIers because they usually don’t have the stomach for putting their hard-earned nest egg at risk in the stock market. Most FIers probably fall somewhere in the middle. If you’d like to learn more about what your personal investment philosophy might be, type “risk tolerance” in your browser and take one of the many free tests available on the Web. THREE PILLARS OF FINANCIAL INDEPENDENCE: CAPITAL, CUSHION AND CACHE The basic FI investment program has three elements: Capital: The sum that is invested, ultimately producing at least as much income as indicated by the Crossover Point of Chapter 8.

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◆Duration—the range of maturities available is extensive; you can buy a note or bond that will mature in a few months or one that won’t come due for thirty years. ◆Absolute stability of income over the long run—ideal for FI. Avoids the income fluctuations that would occur with money market funds, rental real estate, etc. Treasury Bonds Treasury bonds are the ideal investment vehicle for FIers with a low risk tolerance because they protect principal, provide a steady stream of income and are relatively easy to understand. In addition, they are exempt from local and state taxes, can be bought and sold almost instantly with minimal handling charges, and are protected by the full faith and trust of the U.S. government.

The Gig Economy: The Complete Guide to Getting Better Work, Taking More Time Off, and Financing the Life You Want
by Diane Mulcahy
Published 8 Nov 2016

Beth’s case illustrates that her worst-case fears are unlikely given her situation. That’s not uncommon, but sometimes our fears are rooted in likely outcomes. In those cases, this exercise can be very helpful in identifying actions you can take to reduce risks. It’s possible that after completing this exercise, you’ve come across risks that are too big for your personal risk tolerance, even after you attempt to deal with them. In this case, you may want to consider modifying or restructuring the thing you want to do so that it’s smaller and less risky. For example, maybe after completing this exercise you determine that you really aren’t in a good financial position to start your own business.

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Risks are concrete and specific, and once we’ve identified a risk, there are several options for evaluating it and dealing with it. Below are six possible options for dealing with risk. As you break down your fears into their underlying risks, consider each of the options below: Reduce Risk by Mitigating It If the risk you’re contemplating seems too high for your personal risk tolerance, you might be able to mitigate it. For example, John works full time at an accounting firm whose clients are medium-and large-sized businesses. If John’s employer goes out of business, John’s income would go from 100 percent to 0. John is uncomfortable with that risk, so he has developed a side business working with entrepreneurs and small businesses, helping them with their bookkeeping, financial statements, and taxes (these clients are not competitive with his employer).

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Reduce Risk by Accepting It We regularly accept risk in our lives because most activities involve some degree of risk, even if it’s remote. We make reasonable trade-offs about the size of the risk and the probability that it will occur compared to the rewards we expect from pursuing the activity. How much risk we’re willing to accept depends on our personal risk tolerance. Heli skiers and skydivers are willing to accept relatively higher levels of risk for the thrill of pursuing those activities. Most of us are willing to accept low levels of risk in our daily lives. We eat out in restaurants, even though there’s a chance of food poisoning. We go swimming, even though we could drown, and we take buses and trains that have some small chance of crashing.

MONEY Master the Game: 7 Simple Steps to Financial Freedom
by Tony Robbins
Published 18 Nov 2014

Our need for certainty is a survival mechanism. It affects how much risk we’re willing to take in life—in our jobs, in our investments, and in our relationships. The higher the need for certainty, the less risk you’ll be willing to take or emotionally bear. By the way, this is where your real “risk tolerance” comes from. But what if you’re totally certain all the time? If you knew what was going to happen, when it was going to happen, how it was going to happen. You knew what people were going to say before they said it. How would you feel? At first you’d feel extraordinary, but eventually you’d be what?

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Because those fees, taxes, and losses that come along with stock picking and market timing put a drag on your profits. Asset allocation is more than diversification. It means dividing up your money among different classes, or types, of investments (such as stocks, bonds, commodities, or real estate) and in specific proportions that you decide in advance, according to your goals or needs, risk tolerance, and stage of life. Wow, that’s a mouthful, isn’t it? Yet it’s the key to success or failure for the world’s best financial players, including every single one of the investors and traders I interviewed for this book. Paul Tudor Jones swears by it. Mary Callahan Erdoes, perhaps the most powerful woman on Wall Street, leads 22,000 financial professionals whose livelihoods depends on it.

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You can have your complimentary asset allocation (and full portfolio review) done for you online at www.strongholdfinancial.com or by your own fiduciary advisor. But it’s important to understand the concept of asset allocation and which investments are available for each of these buckets so that your overall portfolio—your group of investments—reflects your goals and level of risk tolerance. That way you’re still running the show! At every decision point, you’ll be thinking, “How much am I risking and how much am I keeping secure?” That’s where the game is won or lost! And, as you’ve already seen, the biggest challenge for your Security Bucket today is: What is really secure? We know the world has changed, and even conservative savers have been forced into riskier and riskier investments by crazy-low interest rates.

Becoming Kim Jong Un: A Former CIA Officer's Insights Into North Korea's Enigmatic Young Dictator
by Jung H. Pak
Published 14 Apr 2020

We were all too aware that the furious pace of the missile tests and the regime’s military modernization efforts had the potential to spiral quickly into an armed confrontation. At the time, one of our biggest questions was who or what served to constrain Kim’s behavior. How likely was Kim to veer toward a serious miscalculation? What—or who—were the brakes or enablers of his actions? What we were confident about was that Kim’s risk tolerance was high and his confidence was growing. * * * — Despite all the chest-thumping and bad behavior, Kim is not looking for a military confrontation with the United States. He is rational, not suicidal, and given his involvement in his country’s military affairs and almost certain knowledge of its deficiencies, he is aware that North Korea would not be able to sustain a prolonged conflict with either South Korea or the United States.

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These “princes” and “princesses” wield influence as a result of their familial and financial networks and form Kim’s own base of support as he cultivates a new generation that is beholden to him and not his predecessors. Perhaps he sees them as less wedded to the old ways of conducting business—literally and figuratively—and more pliable and risk tolerant. There have been signs of Kim’s disdain for the older generations and their corresponding attitude toward governance. His sushi chef and childhood playmate, Fujimoto, saw a teenage Kim kick and taunt an elderly former aide to his grandfather; the aide had no choice but to take the abuse.

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In the North Korean system, you have to praise Kim and sing hymns about him and take it seriously, even if you think it’s only a shit narrative.” And Kim Jong Un was making sure that no one challenges that narrative, even Americans. The Sony incident was the result of Kim’s paranoia combined with his brazenness and high risk tolerance for testing his capabilities. The New York Times reporter David Sanger concluded, “Cyberweapons were tailor-made for North Korea’s situation in the world: so isolated it had little to lose, so short of fuel it had no other way to sustain a conflict with greater powers, and so backward that its infrastructure was largely invulnerable to crippling counterattacks.”

A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing (Eleventh Edition)
by Burton G. Malkiel
Published 5 Jan 2015

Bonds (and bond-like securities to be covered in Part Four) have proved their worth as an effective diversifier. Source: Vanguard. In summary, the timeless lessons of diversification are as powerful today as they were in the past. In Part Four, I will rely on this discussion of portfolio theory to craft appropriate asset allocations for individuals in different age brackets and with different risk tolerances. *Statisticians use the term “covariance” to measure what I have called the degree of parallelism between the returns of the two securities. If we let R stand for the actual return from the resort and R – be the expected or average return, whereas U stands for the actual return from the umbrella manufacturer and U – is the average return, we define the covariance between U and R (or COVUR) as follows: COVUR = Prob. rain (U, if rain – U –) (R, if rain – R –) + Prob. sun (U, if sun– U – ) (R, if sun – R –).

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Hong, Kubik, and Stein provided more systematic evidence as to the importance of friends in influencing investors’ decisions. They found that social households—those who interact with their neighbors, or attend church—are substantially more likely to invest in the market than nonsocial households, controlling for wealth, race, education, and risk tolerance. Any investment that has become a topic of widespread conversation is likely to be especially hazardous to your wealth. It was true of gold in the early 1980s and Japanese real estate and stocks in the late 1980s. It was true of Internet-related stocks in the late 1990s and early 2000 and condominiums in California, Nevada, and Florida in the first decade of the 2000s.

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On the other hand, if you are in a low tax bracket and need high current income, you should prefer taxable bonds and high-dividend-paying common stocks so that you don’t have to incur the transactions charges involved in selling off shares periodically to meet income needs. The two steps in this exercise—finding your risk level, and identifying your tax bracket and income needs—seem obvious. But it is incredible how many people go astray by mismatching the types of securities they buy with their risk tolerance and their income and tax needs. The confusion of priorities so often displayed by investors is not unlike that exhibited by a young woman whose saga was recently written up in a London newspaper: RED FACES IN PARK London, Oct. 30 Secret lovers were locked in a midnight embrace when it all happened.

A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing
by Burton G. Malkiel
Published 10 Jan 2011

Domestic stocks: 1926–1970 S&P 500 Index (monthly reinv); 1971–4/22/2005 Dow Jones Wilshire 5000 Index; 4/22/2005 – present MSCI US Broad Market Index. In summary, the timeless lessons of diversification are as powerful today as they were in the past. In Part Four, I will rely on this discussion of portfolio theory to craft appropriate asset allocations for individuals in different age brackets and with different risk tolerances. REAPING REWARD BY INCREASING RISK Theories that are right only 50 percent of the time are less economical than coin-flipping. —George J. Stigler, The Theory of Price AS EVERY READER should know by now, risk has its rewards. Thus, both within academia and on the Street, there has long been a scramble to exploit risk to earn greater returns.

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Harrison Hong, Jeffrey Kubik, and Jeremy Stein provided more systematic evidence as to the importance of friends in influencing investors’ decisions. They found that social households—those who interact with their neighbors, or attend church—are substantially more likely to invest in the market than nonsocial households, controlling for wealth, race, education, and risk tolerance. Any investment that has become a topic of widespread conversation is likely to be especially hazardous to your wealth. It was true of gold in the early 1980s and Japanese real estate and stocks in the late 1980s. It was true of Internet-related stocks in the late 1990s and early 2000 and condominiums in California, Nevada, and Florida in the first decade of the 2000s.

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On the other hand, if you are in a low tax bracket and need high current income, you should prefer taxable bonds and high-dividend-paying common stocks so that you don’t have to incur the transactions charges involved in selling off shares periodically to meet income needs. The two steps in this exercise—finding your risk level, and identifying your tax bracket and income needs—seem obvious. But it is incredible how many people go astray by mismatching the types of securities they buy with their risk tolerance and their income and tax needs. The confusion of priorities so often displayed by investors is not unlike that exhibited by a young woman whose saga was recently written up in a London newspaper: RED FACES IN PARK London, Oct. 30 Secret lovers were locked in a midnight embrace when it all happened.

Expected Returns: An Investor's Guide to Harvesting Market Rewards
by Antti Ilmanen
Published 4 Apr 2011

Buying opportunities tend to be greater in bad times just when the risk or risk aversion is commensurately higher. Contrarian market timing is not for everyone (and cannot be—or contrarian investors would have no one to trade with). Investors who differ from the market by having a longer investment horizon and greater risk tolerance than most investors may be natural risky asset buyers during bad times when valuations are attractive. (This last statement is based more on strong intuition than on existing theoretical models; see note 5 in Chapter 28.) Time-varying risk premia can generate a “discount rate effect”: changes in the market’s required returns cause opposite-signed moves in realized returns.

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Thus, higher price-to-rent ratios may reflect lower financing costs or changes in any of the features listed above. Such comparisons are one way to assess how much of the housing market rally was based on fundamentals and how much was irrational, perhaps reflecting extrapolative expectations and the naive belief that house prices cannot fall. General liquidity, high risk tolerance (complacency), securitization innovations in mortgage markets, and lax lending standards also contributed. Wallison (2009) has also blamed government policy intended at expanding the proportion of homeowners, but his argument explains only the housing boom in the U.S.—not the rest of the world.

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These studies identify expected returns by the ability of some countercyclical indicator (such as yield curve steepness or consumption–wealth ratio) to predict near-term returns—and assume that fitted realized returns in a regression are the expected returns of a rational market. Based on this logic, rational investors may foresee low expected returns near a cyclical peak and accept these as fair, thanks to their higher risk tolerance amidst abundant wealth. However, even if predictability regressions capture objectively feasible near-term returns, survey evidence raises doubts about whether most investors subjectively expect such countercyclic patterns. Individual investor surveys, especially, suggest that at the end of expansions (near cyclical peaks), optimistic investors have subjectively high expected returns or a high risk appetite, which boosts today’s prices for risky assets and reduces their prospective feasible returns.

Reset: How to Restart Your Life and Get F.U. Money: The Unconventional Early Retirement Plan for Midlife Careerists Who Want to Be Happy
by David Sawyer
Published 17 Aug 2018

If you can’t handle that, and would change course were it to happen, stock market investing may not be for you. (Google “Risk Tolerance Calculator”.) I wouldn’t blame you. There’s oodles of research showing that the Chimp side of our nature is unsuited to the vicissitudes of the stock market. Nobel prize for economics-winning economists such as Robert Shiller have found that: “Put concisely – it’s actually much smarter to admit that you aren’t perfectly rational, and to plan and invest accordingly, rather than deny your true nature[347].” Read up on risk tolerance, take into account your circumstances, work out your goals and timings based on how old you are, and see what you can afford to lose.

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No, it doesn’t, for these reasons: You can only go on what has happened in the past for predicting what happens in the future. Use 3.5% as an expertly researched planning guide if you’re based in the UK. It’s not the be-all and end-all and you may decide to pick anything between 3% and 6.5% depending on where you live and your risk tolerance. All I ask is do your research first, pick a number and reassess every year; the blog Early Retirement Now has a 23-part series on the topic, a good place to start[337]. We’ve already identified that the biggest factor in your SWR is the first ten years after you achieve your stash target.

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In the spirit of the Oscars, finally, I’d like to pay tribute to my hairdresser, Michael Dooey (and his erstwhile nextdoor neighbour, Matthew Casserly), who gets more of my money for less work the older I get. P.P.S. Spotlight down. Over to you… Glossary of Terms Asset allocation: an investment strategy that aims to balance risk and reward by apportioning a portfolio’s assets according to an individual’s goals, risk tolerance and investment horizon. Bonds: loans made to large organisations. These include corporations, cities and national governments. A bond is a piece of a big loan. Careerist: a professional person who has fallen into the habit of putting their career before their life. CETV: stands for Cash Equivalent Transfer Value, the monetary value of your final salary pension.

The Rise of the Quants: Marschak, Sharpe, Black, Scholes and Merton
by Colin Read
Published 16 Jul 2012

Markowitz’s model is most profound if we accept the assumptions that a security can be priced based on its mean historic return and its Expected return Capital allocation line Efficient portfolio frontier Risk-free return Risk Figure 10.1 The capital allocation line 64 The Rise of the Quants Expected return High risk tolerance Capital allocation line Efficient portfolio frontier Low risk tolerance Risk-free return Risk Figure 10.2 Various choices of risk and return along the capital allocation line variance or standard deviation. However, it also acted as a springboard to an equally elegant interpretation from one of Markowitz’s associates, William Forsyth Sharpe.

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Undaunted, Black began to think more about the optimal investment portfolio that could beat the market. He saw options as one way to adjust investment risk exposure at a given time. This is in contrast to the Samuelson approach, which saw options as a discounting problem to settlement based on an individual investor’s risk tolerance. The former is a market-based approach, while the latter is the economist’s representative agent approach. Black started with the assumption that an option price is simply a function of the underlying stock price and the amount of time remaining until settlement. Rewriting in modern standard notation the warrant denotation that Samuelson had used in 1965, we can express Black’s relationship as C(S,t).

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A month after presenting the paper co-authored with Samuelson to the faculty seminar, he presented his own paper to the Harvard/MIT graduate student seminar. This paper was published the following summer as the other bookend to a paper that Samuelson had written on the life cycle of portfolio risk tolerance. In fact, Merton later admitted that his strategy was to learn the mathematics he needed rather than the economics his professors taught, much like Albert Einstein had done as a graduate physics 144 The Rise of the Quants student. He agreed that this was not the best strategy to secure superior grades.

Pivot: The Only Move That Matters Is Your Next One
by Jenny Blake
Published 14 Jul 2016

—Rainer Maria Rilke, Letters to a Young Poet CONTENTS Praise for Pivot Title Page Copyright Dedication Epigraph INTRODUCTION: PIVOT IS THE NEW NORMAL Pivot or Get Pivoted Changing Careers in the Age of the App Connect the Dots Looking Backward Pivot Method at a Glance HIGH NET GROWTH Career Operating Modes Trust Your Risk Tolerance Two (Many) Steps Ahead, One Step Back STAGE ONE: PLANT PLANT OVERVIEW CHAPTER 1: CALIBRATE YOUR COMPASS What Are Your Guiding Principles? What Is Your Happiness Formula? Create Your Compass Identify Your Happiness Formula Your Body Is Your Business Reduce Decision Fatigue Meditate to Activate Your Best Instincts CHAPTER 2: PUT A PIN IN IT What Excites You Most?

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Not if you want to be antifragile in a world that is ruled by them. Impacters find ways to thrive in uncertainty and disorder. Rather than merely reacting to randomness or becoming paralyzed by it, they look for opportunities to alchemize what is already working into what comes next. TRUST YOUR RISK TOLERANCE After much deliberation, I chose not to return to Google after my sabbatical. That is when I first realized that financial security and great benefits were important to me, but not the ultimate drivers of my career decisions. I knew it would not be fair to Google or to my book to give both projects short shrift by taking on too much.

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Barring massive events outside of our control, there is a sweet spot for when and how to pivot. You probably won’t know with 100 percent certainty when to make your next big career move, but you can get a lot smarter about how you reduce the risks and potential margin for error—error in the sense that you end up worse off than you are now. Riskometer We all have a different risk tolerance. What is risky for someone else may be a snoozefest for you. Take your risk temperature by identifying which of the four zones you currently fall into on the Riskometer diagram below. Keep these distinctions in mind as you proceed with your pivot. Pay attention to when you start playing it too safe (when you might find yourself slipping from the comfort zone into stagnation), when something feels edgy but exciting (stretch zone), or when a next step seems too overwhelming or extreme (panic zone).

Buy Then Build: How Acquisition Entrepreneurs Outsmart the Startup Game
by Walker Deibel
Published 19 Oct 2018

Extreme attention to detail tends to keep action at bay indefinitely, or at least results in delayed implementation. 48 Entrepreneurship is almost synonymous with a high-risk tolerance. It’s one of the first things people think of when startups are mentioned. Indeed, people who have a tolerance for risky endeavors will eventually find themselves participating in all-or-nothing type activities, and the startup model emulates the high risk-high return profile. That said, most startups fail, and the ones with high risk tolerance tend to fall in that category. Successful entrepreneurs tend to consider themselves comfortable with a certain amount of risk, but are extremely calculated in their efforts.

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As you read through it, consider how strongly you see each attribute in yourself and what traits might be missing. Also consider what might be missing from the list. Strategic-thinking skills Interpersonal skills Intellectual ability Industry experience Ability to deal with ambiguity Tenacity Organized Laser-focused Achievement-oriented Thick-skinned Risk tolerant 41 Self-confident Creative Optimistic Assertive Decisive Methodical Perfectionistic Got it? Before reviewing the results, I want you to understand that data suggests that the number one characteristic of being successful is not on this list at all. It’s not a skill we would see in a job description or resume.

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David Weller, founder of Leadership Alliance and a true expert in assessing top talent, told me that about a third of the variants for success are simple competencies. These include, but are not limited to: 49 Possessing a drive for results and being able to get results from others The ability to make decisions, including unpopular decisions Strategic agility when dealing with ambiguity A certain level of risk tolerance Financial acumen Critical thinking, which is an innate trait Tactical ability Perseverance Self-awareness, which includes the ability to work through your weaknesses and not have blind spots Interpersonal skills The last one is worth noting. When you are CEO of a company, you must be able to sell; it’s a requirement.

file:///C:/Documents%20and%...
by vpavan

You can do a similar calculation by going to the American Savings Education Council Web site, www.asec.org. Click on the "Ballpark Estimate" retirement planning worksheet, and plug in your own numbers. Now you're ready to take the next crucial steps: determining how much risk you can tolerate and how to allocate your funds among the many investment options. Risk tolerance and asset allocation go hand in hand. Risk is the possibility that your investment won't produce the level of returns that you were expecting. All investments are risky, and some are riskier than others. But in general, the higher the risk, the greater the potential reward.

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But if you can lose 10 percent or 25 percent and take it in stride— hoping that the market will bounce back as it has done historically— then your appetite for risk is greater and you should consider investing a portion of your funds in smaller, fast-growing companies. Brokers also use this information to make sure they are complying with NASD "suitability" rules. These require brokers to recommend only securities that are suitable for your risk tolerance, financial situation, and investment objectives. In general, the higher the risk, the greater the potential for reward and for losses. Shares of start-up companies, or of companies in emerging markets such as Asia and Latin America, are considered high-risk. Low-risk investments, such as government bonds, are guaranteed to return a steady stream of interest, plus your initial investment.

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"The biggest change over the next five years will be the emergence of what I call the final choice— delegating asset allocation to someone else," says David Wray, director of the Profit Sharing/401(k) Council of America, an industry-funded association. One such development is the so-called life-cycle fund. Rather than offering a confusing menu of investments, these options offer pre-set mixes of securities aimed at making it easy for workers to match investment choices to age and risk tolerance— that is, to their place in the life cycle. Such funds are professionally managed, with adjustments in portfolio holdings made over time, as appropriate. For example, a life-cycle account for younger investors, who can afford to be more aggressive, would hold more stocks than an account for workers nearing retirement.

Liars and Outliers: How Security Holds Society Together
by Bruce Schneier
Published 14 Feb 2012

It's pedestrian, common, slowly evolving, affecting others, increasingly familiar, and (at least by techies) well-understood. So it makes sense that we understate the risks and underfund security. There are cultural biases to risk as well. According to one study conducted in 23 countries, people have a higher risk tolerance in cultures that avoid uncertainty or are individualistic, and a lower risk tolerance in cultures that are egalitarian and harmonious. Also—and this is particularly interesting—the wealthier a country is, the lower its citizens' tolerance for risk. Along similar lines, the greater the income inequality a society has, the less trusting its citizens are.

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Part I The Science of Trust Chapter 2 A Natural History of Security Our exploration of trust is going to start and end with security, because security is what you need when you don't have any trust and—as we'll see—security is ultimately how we induce trust in society. It's what brings risk down to tolerable levels, allowing trust to fill in the remaining gaps. You can learn a lot about security from watching the natural world. Lions seeking to protect their turf will raise their voices in a “territorial chorus,” their cooperation reducing the risk of encroachment by other predators for the local food supply.

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(Large, long-term risks like nuclear weapons, genetic engineering, and global warming are much harder for us to comprehend, and we tend to minimize them as a result.) Today, societal scale continues to grow as global trade increases, the world's economies link up, global interdependencies multiply, and international legal bodies gain more power. On a more personal level, the Internet continues to bring distant people closer. Our risk tolerance has become so low that we have a fetish for eliminating—or at least pretending to eliminate—as much risk as possible from our lives. Let's get back to societal pressures as a series of knobs. Technology is continuously improving, making new things possible and existing things easier, cheaper, better, or more reliable.

The Gone Fishin' Portfolio: Get Wise, Get Wealthy...and Get on With Your Life
by Alexander Green
Published 15 Sep 2008

I’ll be the first to concede that once you reach the late stage of life where your primary (or sole) objective is to structure your portfolio for maximum income and capital preservation, you need to make your asset allocation more conservative. Still, the question remains: Does someone who realistically has a decade or more of life ahead of him truly need someone to assess his “personal risk tolerance” and design a customized asset allocation? My answer is no. As the pioneering fund manager John Templeton once said, “For all long-term investors, there is only one objective—maximum total return after taxes.” Yet some investment advisors seem to be planning for another objective: their clients’ inability to stick with the program, even if that means they won’t meet their long-term investment objectives.

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He has spent a lot of time researching and writing about the perfect portfolio for retirement. In June 2002, he wrote a column on “Client Strategies” in the journal Financial Planning for fellow CFPs. He writes that, with very few exceptions, “The optimum asset allocation for an income portfolio has nothing to do with your client’s risk tolerance, his investment knowledge or many other countless questions that your clients are forced to answer during your initial interview. Other than fulfilling the regulatory requirements, the ritual of risk assessment has no significance to the optimum asset mix.” Some advisors will argue that their clients can’t withstand the volatility inherent in stocks.

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(mutual fund research) DeMuth, Phil Earnings, share prices (relationship) Efficient market hypothesis (EMH) advocacy Efficient portfolio Emerging market stocks Emotional Intelligence (Goleman) Emotional quotient (EQ) European stocks Exchange-traded fund (ETF) advantages weighing expenses open-ended characteristic performance, cash drag portfolio ranking State Street Global Advisors initiation tax problems, avoidance WSJ/Morningstar study Expense ratio composition level Expert Political Judgment (Tetlock) Experts, knowledge Faugere, Christophe (money manager performance research) Fidelity Magellan Fund track record Financial advisor, requirement (absence) Financial freedom importance requirement step one Financial future, planning responsibility Financial goals, meeting Financial independence calculation proximity Financial markets, understanding (degree) Financial responsibility Fishing, truth Foreign markets diversification reasons risk Forsythe, Greg (emotions comment) (k) contribution disadvantage usage (b), usage Four Pillars of Investing, The (Bernstein) Future, prediction (problem) Global economy, U.S. proportion Gold movement returns shares inclusion, reasons proportion usage Graham, Benjamin investment advice investor problem Great Depression Greenspan, Alan (LTCM buyout) Growth portfolio Hand, Learned (tax management comments) Hedge fund ownership, eligibility High Expectations and False Dreams (Otar) High-grade bonds, investment High-grade corporate bonds, taxable income High-quality stocks, exposure High-yield bonds proportion stocks, correlation tax inefficiency usage Historical asset returns, understanding Historical averages, usage Historical data, examination Humility, wisdom (relationship) Index funds reliance Indexing, power Index mutual funds, WSJ/Morningstar study Individual Retirement Account (IRA) contribution usage percentage Inflation impact increase Inflation-adjusted Treasury bonds proportion usage Intelligent Asset Allocator, The (Bernstein) Investment advisors, usage (decision) aggressiveness, problem aims annual return automation compound timing confusion conservative approach, problem criticism decisions delegation, problems diversification argument expectations factors importance goals humility, impact knowledge mistakes objective philosophy pitfalls portfolio long-term value determination, factors usage principles understanding process, knowledge reality check risks, elimination seriousness stability/returns, relationship strategy problems, avoidance success system, steps Investors long-term financial requirement target taxes/expenses, reduction iShares iBoxx $ High Yield Corporate Bond Fund description holdings iShares Lehman TIPS Bond Fund description holdings Jensen, Michael (mutual fund manager analysis) Junk bonds, inclusion (criticism) Kaderlis, Billy/Akaisha (retirement example) Keogh, usage Large-cap stock, market capitalization Legg Mason Value Trust Lewis, Michael Life philosophy, presence Lifestyle, calculation Little Book of Common Sense Investing, The (Bogle) Long Term Capital Management (LTCM), crash Long-term core portfolio, short-term trading portfolio (separation) Long-term financial goals, meeting Long-term investment portfolio, personalization Long-term investment success Long-term portfolio, recommendation/ criticism Lynch, Peter investment advice market prediction Management fees Market capitalization declines outguessing, problem timing absence avoidance Market-impact cost Market Vectors Gold Miners ETF description holdings Markowitz, Harry Mental accounting Milken, Michael Miller, Bill Miller, Merton Millionaire Next Door (Stanley/Danko) Millionaires, characteristics Mind of the Market, The (Shermer) Modern portfolio theory (MPT) advocacy Money investment management managers, performance stocks division truth Mutual funds advantage Bogle research costs, shareholder absorption industry, size managers, benchmark underperformance principle stock trading behavior types Net asset value (NAV), divergence Net worth, result No-load bond funds, usage No-load index funds, usage Overseas markets, earnings growth Oxford Club Communique, Hulbert Financial Digest ranking Pacific Rim stocks Peer pressure, perspective Perma-bears recommendations Personal risk tolerance, assessment Phantom income, taxation Philosophy:Who Needs It (Rand) Portfolio annual return balance blend breakdown goals implementation market timer, impact net return, concern rebalancing process setup strategy tax management test tracking process volatility, reduction Precious metals index, assembly mining stocks Prediction, difficulty Pre-tax returns, post-tax returns (contrast) Private pension plans, disappearance Prosperity, stock market creation Raskob, Jacob Real estate investment trusts (REITs) proportion tax inefficiency usage Rebalancing emotions, avoidance process timing usage usefulness Recessions, predictability Redemptions, impact Retirement goals/plan steps Retirement Confidence Survey Rich, SEC definition Risk elimination level, acceptability Sacrifices, making Samuelson, Paul Savings amount importance priority proportion spending, balance Securities, pricing efficiency Self-interested parties, impact Share price, fluctuation Sharpe, William Shawky, Hany A.

Magic Internet Money: A Book About Bitcoin
by Jesse Berger
Published 14 Sep 2020

Bitcoin, as its own new monetary system and asset class, offers an unparalleled risk and reward profile. The key to understanding the opportunity it represents requires putting risk in context. 4.4.2 Calculated Risk: Expect the Unexpected “People think I got into bitcoin because I have a high risk tolerance ... actually I got in because I have a low risk tolerance for worst case scenarios.” Jill Carlson, Co-Founder of Open Money Initiative Generally speaking, there are two major risk categories to consider when investing in anything – unsystematic and systematic risk. Unsystematic risks are specific to a particular company, industry, or asset class, with narrow impacts typically associated with factors of productivity, such as land, labor, and physical and intellectual capital.

Demystifying Smart Cities
by Anders Lisdorf

This group uses the bleeding edge technologies that are experimental and unproven. It also has a high-risk tolerance. Early adopters – Are more selective than the innovators but put high emphasis in being first. They often look for a first-mover advantage in terms of adopting technology. Early majority – This group is open to innovation but likes to see it demonstrated by others first. This is one of the largest groups. Late majority – Adopt innovation after half of the market has already adopted it. They are skeptical and are also often driven by very low-risk tolerance in terms of technology. Laggards – Are the ones buying legacy technologies when most others have gotten rid of them.

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When technology implementations are being considered, their respective position on the technology adoption curve should be matched against the city’s. It is not a good idea for a laggard city to engage in bleeding edge projects. The probability of success will be low because it takes a special way of management and risk tolerance to be successful with that. There is also a good chance that employees will not feel confident when they suddenly have to do a lot of unknown tasks. A city that is just getting ready to move some things off the mainframe may not be an ideal candidate for a block chain implementation. Conversely, cities that are innovators may not have motivation to implement technologies that provide only incremental gains.

Imaginable: How to See the Future Coming and Feel Ready for Anything―Even Things That Seem Impossible Today
by Jane McGonigal
Published 22 Mar 2022

However you choose to respond to this emergency alert will help determine the fate of a billion people. And given what’s been going on where you live—longer and more extreme heat waves, more frequent power and water outages—it might decide your fate too. EMERGENCY ALERT—IT’S PARTY TIME! Congratulations! You have been selected to participate in the First Global Census of Climate Risk Tolerance and Migration Intent. Ten years from today, the world will begin the largest human migration ever attempted. Up to one billion people are expected to request relocation from regions that have been severely affected by climate change. The Welcome Party, a coalition of thirty-three national governing parties, is preparing models and forecasts to help plan migration routes and to prepare climate-resilient destination cities for a rapid population influx.

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You tap the link and scroll quickly through the questions to get a better sense of what information they want from you. No wonder they gave you ten days to think it over. Some of these questions you honestly have no idea how to answer. You start weighing your choices . . . The First Global Census of Climate Risk Tolerance and Migration Intent On a scale of 1 to 10, how free do you feel to move to a safer climate if you need to? (Not free at all) 1 2 3 4 5 6 7 8 9 10 (Completely free) What might cause you to STAY in your current home, even if the climate became extremely unsafe? Mark all that apply. I lack the financial resources to move.

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Journaling ideas Below are some ideas for what you might journal about as you spend ten days in the world of “Welcome Party.” Pick and choose whichever ones you like (or invent your own prompts, guided by your own curiosity and creativity): 1. Spend some time taking the Welcome Party’s First Global Census of Climate Risk Tolerance and Migration Intent. Answer just one question each day. Remember, you’re answering the questionnaire as future you. Keep in mind where you might live, with whom, and what your life circumstances might be like in the year 2033—they might be the same as today, or they might be quite different.

Risk Management in Trading
by Davis Edwards
Published 10 Jul 2014

As long as the strategies are not highly correlated, traders can use diversification to reduce the overall risk of the portfolio. Not only does this lead to a potentially improved risk/return relationship, this has a big impact on profitability since the size of the portfolio is typically measured as a VAR number. KEY CONCEPT: TRADING DESKS AND RISK TOLERANCE Trading desks are typically limited by risk tolerance rather than capital. This is due to the fact that most trading desks can achieve a high degree of leverage by borrowing money, taking on leveraged trades, and similar activities. 112 RISK MANAGEMENT IN TRADING For example, if a trading desk with a $1 million VAR limit is trying to allocate investment between two uncorrelated strategies with the same Sharpe Ratio, the VAR limit for each investment (the size of the investment) will not be $500,000 each.

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See probability density function percent returns, 148–150 phi, 203, 232–234 Index portfolio value-at-risk, calculating, 161–164 position limits, 142–143 setting, 2, 11 potential future exposure, current exposure and, 260 pre-trade monitoring, 117–118 preferred stock, 44–45 price of underlying asset, 201 prices, 21 probability density function, 64–65 probability of default, 240–241, 247–254 cumulative, 248–250 loss given default and, 254–255 market-based, 252–254 processing, 14 profits calculating, 2, 10–11 losses and, 121–123 prospective testing, 188 put/call parity and gamma, 225–226 305 Q quotes, 21 return, risk and, 99 reviewers, 115 reward, risk and, 26–27 rho, 203, 232–234 time value of money and, 232 right-way risk, 255 risk avoidance, 28–29 risk management, 9–10, 23, 116 risk, managing, 28–29 risk tolerance, trading desks and, 111 risk caused by value adjustment, 263 cost of eliminating, 229–230 defined, 23–25 holistic view of, 115–117 model, 107–108 monitoring, 27–28 removing, 180 return and, 99 reward and, 26–27 right- and wrong-way, 255 settlement, 262–263 trading decisions and, 10–11 transfer via hedging, 178 types of, 25 rogue trading, 113–114 R random numbers, 63–66 random walks, 72–75 randomness, results and, 111 real assets, 35–36 real estate investment trusts, 45 recursive calculations, 158 reduction, risk, 29, 267 regression tests, 191–194 REIT.

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See real estate investment trusts reputational risk, 25 results, randomness and, 111 retrospective testing, 188 S sales, 13 scheduling, 13 second derivative, 84–85 securities, 22 settlement risk, 262–263 Sharpe Ratio, 109–110 short selling, regulations about, 16 shortfall, expected, 172–173 shorting, 4 simulation accuracy, 98 skew, 70–72 slippage, 101–105 social activity, trading as, 238 306 speculators, market stability and, 136 spot prices, 21 statistics, 66–67 stochastic processes, 64, 72–75 stocks, 42, 44–45 stop limit orders, 19 stop orders, 18–19 strategic risk, 25 strategies, 6–8 combining, 111–112 comparing, 108–111 strategy testing, 97–101 support and control, 13–14 systematic trading, 95–96 T Taylor Series Expansion, 89–90, 203–204 testing hedge effectiveness, 187–189 strategy, 97–101 tests, regression, 191–194 theta, 202, 226–230 time until expiration, 201 time value of money, 90–92 rho and, 232 time, vega and, 232 timing, 101 trade forensics, 1–2, 10 trade surveillance, 112–118 trading, 12–16 as social activity, 238 requirements for, 16 systematic, 95–96 trading decisions, risk and, 10–11 trading desks, 2–3 risk tolerance and, 111 trading limits, 147–148 trading positions, 20–21 INDEX trading risk, managing, 21–23 transactions, 130 transactions costs, 101–105 transfer, risk, 29, 267 Treasury bills, 49 U UL. See unexpected loss unexpected loss, 240–241 V validation, data, 96–97 value of options, 204–207 value-at-risk limits, in practice, 170 value-at-risk sensitivity, 162–163 value-at-risk as size measure, 147 defined, 143–147 misuse of, 171–173 non-parametric, 167–169 parametric, 150–161 zero and, 164 VAR.

The Power of Passive Investing: More Wealth With Less Work
by Richard A. Ferri
Published 4 Nov 2010

More established investors should not rely solely on questionnaires for determining their risk level. More thought and attention should be given to their unique situation. Finding a person’s maximum tolerance for risk requires soul-searching. We tend to feel brave when prices are going up, which means that it’s not the ideal time to decide our risk tolerance level. Perhaps the best time to decide is after the market has dropped 20 or 30 percent when we’re likely to be more honest with ourselves. No one can guarantee that any investment strategy will achieve its stated objective. However, emotionally-charged selling in a bear market will almost guarantee that an investment plan will be derailed.

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reinvestment Use of investment income to buy additional securities. Many mutual fund companies and investment services offer the automatic reinvestment of dividends and capital gains distributions as an option to investors. return of capital A distribution that is not paid out of earnings and profits. It is a return of the investor’s principal. risk tolerance An investor’s ability or willingness to endure declines in the price of investments while waiting for them to increase in value. R-squared A measure of how much of a portfolio’s performance can be explained by the returns on the overall market (or a benchmark index). If a portfolio’s total return precisely matched the return on the overall market or benchmark, its R-squared would be 1.00.

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active management of benchmark tracking and brokerage use of first of the growth in market introduction of taxes and turnover within U.S. equity Index investing, Wall Street’s battle against IndexUniverse.com Individual investor(s): asset allocation for asset side and assets to obligations beginning at the end hiring an advisor human vs. monetary capital investment decisions needs identification and obligations, estimation of risk tolerance of Individual Retirement Account (IRA) Inflation expectation Inheritances Institutional investors Insurance, types of Internal Revenue Service (IRS) International equity funds International risk premiums Internet investment resources Intrinsic value of stocks Invesco PowerShares Investment Advisers Act of 1940 Investment advisors Investment Company Act of 1940 Investment monitoring Investment Performance Measurement Investment policy changes Investment Policy Statement (IPS): as guidebook life obligations and rebalancing and steps leading to Investment pyramid Investments, savings and Investment selection: asset classes and commodities and inflation rate and low-cost index funds/EFTs Investment strategy options Investors.

Statistical Arbitrage: Algorithmic Trading Insights and Techniques
by Andrew Pole
Published 14 Sep 2007

Thus, the goal becomes: Maximize expected return subject to a limit on expected variance of return. Let us express these results in mathematical form. First, definition of terms: n fi  ip k Number of stocks in investment universe Expected forecast return for stock i; f = (f1 , . . . , fn )
Expected variance of returns, V[f ] Value to be invested in stock i; p = (p1 , . . . , pn )
Risk tolerance factor Now the goal is expressed as: maximize p
f − kp
p 29 Statistical Arbitrage 2.5.1 Exposure to Market Factors Statistical arbitrage fund managers typically do not want a portfolio that takes long positions only: Such a portfolio is exposed to the market. (A pairs trading scheme, by definition, will not be biased but statistical arbitrage models more generally readily generate forecasts that, unless constrained, would lead to a portfolio with long or short bias.)

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The significance of this fact is in directing a manager to construct stop loss rules (early exit from a bet that is not working according to forecast expectation) that curtail losses without limiting gains. Where this is possible, a model with seemingly textbook sized relative odds in favor of winning forecasts can be profitably traded within prescribed risk tolerances. Technically, such rules modify the utility function of a model by altering the characteristics of the outcome set by employing a procedure in which the forecast model is only one of several elements. A warning: Beware of being fooled by purveyors of tales of randomness. A strategy that offers bets that typically generate a small loss and occasionally a whopping gain sounds alluring when proffered as relief after a cunningly woven web of disaster shown to seemingly inevitably follow plays where the odds are conventionally in favor of winning.

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Event correlation 70 SAI FRE 60 50 40 30 20 10 19960102 19961231 19971231 FIGURE 8.1 Adjusted price histories for FRE and SAI 19980806 143 Nobel Difficulties 70 SAI FRE 60 50 40 30 20 10 19960102 19961231 19971231 19980806 FIGURE 8.2 Adjusted price histories for FRE and SAI to August 1998 indicates what might be expected to trade well in groups within prescribed risk tolerances (see Chapter 2). Visually and statistically, it looks as though the pair [FRE, SAI] will trade profitably in a simple spread reversion model. Simulation of a basic popcorn process model (see Chapter 2) demonstrates that was indeed the case. Figure 8.2 shows the adjusted price series for FRE and SAI extended through the second quarter of 1998 to August 6.

Smart Cities, Digital Nations
by Caspar Herzberg
Published 13 Apr 2017

CCI will continue to participate in consulting projects and maintain Cisco’s alignment with this quiet, steady rollout of smart city services. China may have a great many services to refine, and delivery of anything—tangible or intangible—to 1.6 billion people will never be simple. But the combination of aggressiveness, high risk tolerance, concentrated power, and key partnerships means that Cisco’s work will continue to be innovative, even when the headlines of the day turn bleak. The inevitable signs of economic slowdown began to appear in 2012–2013; by the next year, a wild card news item assured that Cisco’s efforts in China would be a rough ride for the next few years.

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It is precisely this boldness that will underpin any greenfield smart and connected city of the future; it also will characterize the actions of any leader who is willing to break with past methods and embrace IoE solutions with shorter success trails but extensive potential to make a city work better for more people. Those who believe such imagination and risk tolerance are rare finds in China likely have given the market only a cursory glance. This is a nation of ambition on many levels; the ambition runs deep enough for opportunity to exist for motivated outsiders as well as the burgeoning national suppliers. But sales and consulting arms will have to be aggressive in courting them

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After an initial setback in Saudi Arabia, the group needed a new place to continue the digital city experiment; South Korea was ready to engage and take the idea further. In China, the team found scale; in India, digital nation building. All the while, the parent corporate structure allowed the author and his peers to experiment, while demanding accountability, progress, and the application of lessons learned. This culture that fosters ambition, risk tolerance, and collaboration with new partners is critical to the success of future city-building projects. The third and most personal theme is linked directly to the second: facing failure, which is an inevitable byproduct of engineering on the scale of cities. There is a corollary need to recognize success that goes beyond the surface or real time.

Early Retirement Guide: 40 is the new 65
by Manish Thakur
Published 20 Dec 2015

If you're more risk averse and will worry about having enough, you can use a higher multiplier, such as 30, to calculate your required amount. For people who are more tolerant of risk and believe they can easily become employed if their money runs out, the multiplier could be lower, around 20x yearly spending. For less risk tolerant people, this multiplier will be anywhere from 30-50x. Challenges: 1. Based on a quick calculation of your yearly expenses, determine how much money you would need at this moment to become financially independent. 2. Calculate how much you would need to save to reach this number based on what you've already saved.

Secrets and Lies: Digital Security in a Networked World
by Bruce Schneier
Published 1 Jan 2000

These guys know that you have to spend money to make money, and are willing to invest in profitable attacks against a financial system. They have minimal expertise, but can purchase it. They have minimal access, but they can purchase it. They often have a higher risk tolerance than lone criminals; the pecking order of the crime syndicate often forces those in the lower ranks to take greater risks, and the protection afforded by the syndicate makes the risks more tolerable. POLICE You can think of the police as kind of like a national intelligence organization, except that they are less well funded, less technically savvy, and focused on crimefighting. Understand, though, that depending on how benevolent the country is and whether or not they hold occasional democratic elections, “crimefighting” could cover a whole lot of things not normally associated with law enforcement.

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In extreme cases the insider might have considerable expertise, especially if he was involved in the design of the systems he is now attacking. Revenge, financial gain, institutional change, or even publicity can motivate insiders. They generally also fit into another of the categories: a hacker, a lone criminal, or a national intelligence agent. Malicious insiders can have a risk tolerance ranging from low to high, depending on whether they are motivated by a “higher purpose” or simple greed. Of course, insider attacks aren’t new, and the problem is bigger than cyberspace. If the e-mail system hadn’t been there, the Schwab employees might have used the telephone system, or fax machines, or maybe even paper mail.

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Industrial espionage can be well-funded; an amoral but rational company will devote enough resources toward industrial espionage to achieve an acceptable return on investment. Even if stealing a rival’s technology costs you half a million dollars, it could be one-tenth the cost of developing the technology yourself. (Ever wonder why the Russian Space Shuttle looks a whole lot like the U.S. Space Shuttle?) This kind of adversary has a medium risk tolerance because a company’s reputation (an intangible but valuable item) will be damaged considerably if it is caught spying on the competition—but desperate times can bring desperate measures. PRESS Think of the press as a subspecies of industrial spy, but with different motivations. The press isn’t interested in a competitive advantage over its targets;it is interested in a “newsworthy” story.This would be the Washington City Pages publishing the video rental records of Judge Bork (which led to the Video Privacy Protection Act of 1988), the British tabloids publishing private phone conversations between Prince Charles and Camilla Parker Bowles, or a newspaper doing an exposé on this company or that government agency.

Capital Ideas Evolving
by Peter L. Bernstein
Published 3 May 2007

As far back as 1989, he put it this way: bern_c09.qxd 3/23/07 9:06 AM Page 115 Myron Scholes 115 If the only reason people trade is that they believe they know more than the next person—e.g., have better information— there would be no gains from trade. . . . There have to be other reasons for trade. Although some price moves occur because of changes in information, other price changes take place because of changes in the risk tolerance or liquidity preferences of certain investors.1 Grossman cites two examples of price changes taking place because of changes in risk tolerance or liquidity preferences. The first example involves a pension fund aiming to improve the match between its assets and liabilities by shifting out of stocks into an immunized bond portfolio. The second example involves investors who desire immediacy of execution.

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In addition to providing a benchmark for how the university chooses to trade off risk versus expected return, the Policy Portfolio also serves as the overall yardstick against which the Investment Committee can judge the actual performance of Swensen and his staff. Jack Meyer, Swensen’s counterpart at Harvard from 1990 to 2005, sees the Policy Portfolio in the same light: “If you use a policy portfolio that doesn’t align precisely with your return goals, risk tolerance, and basic asset mix, no amount of clever trading will save you.”3 Nevertheless, the Yale committee’s attachment to the Policy Portfolio has an aggressive as well as a defensive f lavor. As the 1995 report describes it, “Because of the importance of maintaining policy targets, the Investment Office closely monitors deviations of actual from target allocations in the Endowment.

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In an ironic sense, the Capital Asset Pricing Model and the Efficient Market Hypothesis would become descriptions of reality rather than abstract models. Everybody would want to own the same portfolio, and that portfolio in effect would become The Market. Then all prices would clear without variation, everyone would have the same risk tolerance, everyone would earn same rate of return, and everyone would be taking on the same level of risk. To some extent, this process is already well under way. REITs are a conversion of real estate from an asset you can kick to a piece of paper trading in the financial markets. Private equity used to be priced in a negotiation between seller and buyer; now private equity is priced in auction markets.

Nobody's Fool: Why We Get Taken in and What We Can Do About It
by Daniel Simons and Christopher Chabris
Published 10 Jul 2023

Independent replications by other labs generally find far smaller effects, and meta-analyses that correct for selective publication show little or no benefit.27 • A 2010 study of 42 participants reported that those who held their bodies in two separate “power poses” for one minute each subsequently had increased testosterone levels, decreased cortisol levels, greater risk tolerance, and stronger feelings of power than those in a control group. The study was published in Psychological Science and has been cited more than 1,400 times. A TED talk on power posing has been viewed more than sixty-seven million times. Subsequent studies found no evidence of hormonal changes or risk tolerance, the key findings of the study, and the first author of the original study has since disavowed the results.28 • A series of studies and scientific papers in the late 1980s and early 1990s touted the idea that “mastery orientation,” which is now known as “growth mindset,” helps people overcome adversity.

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Cuddy, and A. J. Yap, “Power Posing: Brief Nonverbal Displays Affect Neuroendocrine Levels and Risk Tolerance,” Psychological Science 21 (2010): 1363–1368. TED talk: Amy Cuddy, “Your Body Language May Shape Who You Are,” YouTube, October 1, 2012 [https://www.ted.com/talks/amy_cuddy_your_body_language_may_shape_who_you_are]. A failed replication: E. Ranehill, A. Dreber, M. Johannesson, S. Leiberg, S. Sul, and R. A. Weber, “Assessing the Robustness of Power Posing: No Effect on Hormones and Risk Tolerance in a Large Sample of Men and Women,” Psychological Science 33 (2015): 1–4 [https://doi.org/10.1177/0956797614553946].

Human Diversity: The Biology of Gender, Race, and Class
by Charles Murray
Published 28 Jan 2020

Mental abilities were cognitive performance, educational attainment, general cognitive ability, highest math class taken, intelligence, and self-reported math ability. Personality features (combined sample = 1,319). Personality features were adventurousness, alcohol consumption (drinks per week), general risk tolerance, risk-taking tolerance, life satisfaction, positive affect, subjective well-being, and well-being spectrum. 14. The choice of the particular traits used for this illustrative table doesn’t make much difference. If all of the SNPs in the GWAS Catalog are used, 32 percent of the physiological traits and 34 percent of the cognitive traits have target allele differences that qualify as “large.” 15.

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Depression: Depressed affect, Depression, Depression (quantitative trait), Depressive symptoms, Depressive symptoms (MTAG), Depressive symptoms (SSRI exposure interaction), Depressive symptoms (stressful life events interaction), Major depressive disorder, Major depressive disorder (broad), Major depressive disorder (probable), Current major depressive disorder. Neuroticism: Neuroticism, Neuroticism (MTAG). Worry: Feeling worry, Worry, Worry too long after an embarrassing experience. Risk tolerance: General risk tolerance (MTAG), Risk-taking tendency (4-domain principal component model). Well-being: Eudaimonic well-being, Hedonic well-being, Subjective well-being, Subjective well-being (MTAG), Well-being spectrum (multivariate analysis). Autism: Autism, Autism spectrum disorder, Obsessive-compulsive disorder or autistic spectrum disorder, Social autistic-like traits.

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The noncognitive traits are major diseases such as breast cancer and Parkinson’s disease, physiological biomarkers such as height and weight, and blood parameters such as red cell count and metabolite levels. The cognitive traits are cognitive disorders such as depression, cognitive ability (both IQ and neurocognitive functioning), and personality features such as risk-taking tolerance and life satisfaction. The note gives details.[13] TARGET ALLELE DIFFERENCES QUALIFYING AS “LARGE” (.20+) Physiological Traits No. of Unique SNPs: 13,431 Total: 33% African-Asian: 37% European-African: 33% Asian-European: 30% Diseases No. of Unique SNPs: 3,718 Total: 33% African-Asian: 38% European-African: 33% Asian-European: 30% Biomarkers No. of Unique SNPs: 5,298 Total: 35% African-Asian: 39% European-African: 35% Asian-European: 31% Blood parameters No. of Unique SNPs: 4,415 Total: 31% African-Asian: 35% European-African: 31% Asian-European: 28% Cognitive Traits No. of Unique SNPs: 9,628 Total: 36% African-Asian: 39% European-African: 37% Asian-European: 32% Cognitive disorders No. of Unique SNPs: 2,594 Total: 35% African-Asian: 38% European-African: 37% Asian-European: 31% Mental abilities No. of Unique SNPs: 5,715 Total: 36% African-Asian: 39% European-African: 36% Asian-European: 32% Personality features No. of Unique SNPs: 1,319 Total: 38% African-Asian: 42% European-African: 38% Asian-European: 35% Source: Author’s analysis, GWAS Catalog and Phase 1 of the 1000 Genomes Project.

The Simple Path to Wealth: Your Road Map to Financial Independence and a Rich, Free Life
by J L Collins
Published 17 Jun 2016

In my own career there were many times I chose to step away from working for months or even years at a time. Each time changed my stage. Using this framework of two stages and two funds, you have all the tools you need to find your own balance. In determining that balance you’ll also want to consider two additional factors: How much effort you are willing to apply and your risk tolerance. Effort For the wealth accumulation stage an allocation of 100% stocks using VTSAX is the soul of simplicity. But as we’ve seen, some studies suggest that adding a small percentage of bonds—say 10-25%—actually outperforms 100% stocks. You can see this effect by playing with the various calculators found on the internet.

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This is very much a function of your tolerance for risk and your personal situation. For the smoothest transition, you might start slowly shifting into your bond allocation 5 or 10 years before you are fully retired. Especially if you have a fixed date firmly in mind. But if you are flexible as to your retirement date and more risk tolerant, you might stay fully in stocks right up until you make the change. In doing so the stronger potential of stocks could get you there sooner. But if the market moves against you, you’ll have to be willing to push your retirement date back a bit. Of course, any time you shift between the accumulation and preservation stages, you’ll want to reassess and possibly adjust your allocation.

Testosterone Rex: Myths of Sex, Science, and Society
by Cordelia Fine
Published 13 Jan 2017

Yale Law School academic Dan Kahan showed that, when asked about the risks to human health, safety, or prosperity arising from high tax rates for business, now it was the women’s and minority men’s turn to be sanguine. This, he notes, beautifully illustrates Nelson’s point: It confirms that men are more risk tolerant than women only if some unexamined premise about what counts as a “risk” excludes from assessment the sorts of things that scare the pants off of white men (or at least hierarchical, individualistic ones).39 The white male effect in the United States, viewed alongside the similar risk perceptions of native Swedish men and women, suggests that it can at least sometimes be the different social place, identities, and experiences of men and women in the world, rather than some enduring dissimilarity of biology, that underlie sex differences in risk perception.

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In fact, in the United States, the “masculinity gap” has been closing over time, in step with women’s changing roles and status in society.43 If risk taking is an integral part of a masculine identity, then we can predict that men should take greater financial risks when that identity, or the norms associated with it, are made salient. Viennese academics Katja Meier-Pesti and Elfriede Penz found exactly that. They primed young women and men with either masculine, feminine, or (in a control condition) gender-neutral stimuli. Men primed with masculinity gave the most risk-tolerant responses on a questionnaire assessing attitudes toward risk taking in investments.44 A more recent study also explored the importance of masculine identity for financial risk taking, by exploiting a rather depressing phenomenon known as the “failure-as-an-asset” effect. It turns out that presenting men with evidence that they have done poorly at something at which women tend to excel provides a little boost to their self-esteem, because incompetence in low-status femininity helps establish high-status manliness.

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A., & Sikdar, A. (2009). The role of gender stereotypes in perceptions of entrepreneurs and intentions to become an entrepreneur. Entrepreneurship Theory and Practice, 33(2), 397–417. 42. Lemaster, P., & Strough, J. (2014). Beyond Mars and Venus: Understanding gender differences in financial risk tolerance. Journal of Economic Psychology, 42, 148–160; Meier-Pesti, K., & Penz, E. (2008). Sex or gender? Expanding the sex-based view by introducing masculinity and femininity as predictors of financial risk taking. Journal of Economic Psychology, 29(2), 180–196. 43. Twenge, J. (1997). Changes in masculine and feminine traits over time: A meta-analysis.

Strategy Strikes Back: How Star Wars Explains Modern Military Conflict
by Max Brooks , John Amble , M. L. Cavanaugh and Jaym Gates
Published 14 May 2018

This illustrates an important point: for Rebels, separatists, and weaker nations, strategic shifts are always higher-risk ventures, since their aggregate power inferiority means that they have less of a cushion if the shift turns out to be unwise, undertaken too soon, or undertaken too late. Weaker parties must have a greater risk tolerance than stronger ones, but this makes them more susceptible to disaster. Unsurprisingly, though, the Star Wars metaphor is incomplete when it comes to understanding strategic shifts. Its mythological universe is missing some of the things that can drive strategic shifts, such as the ascension to power of a new leadership cadre with different priorities, objectives, value systems, and risk-tolerance levels and domestic factors like deep social, demographic, and political change or altered economic conditions.

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But ultimately a strategic shift, like the creation of strategy itself, is more art than science, demanding psychological acuity; cross-cultural perceptiveness; an ability to peer through the fog of the future; and, most of all, the boldness to abandon something that had been working and strike out into the unknown with only a blurry, prediction-dependent map. A number of things can inspire an empire, state, or protostate to consider a strategic shift. None is more powerful than a defeat or disaster that proves that the old strategy was bankrupt and compels the boldness and risk tolerance that strategic shifts demand. Think Britain after Dunkirk or the United States after Pearl Harbor and the loss of the Philippines.2 Samuel Johnson once said that the prospect of being hanged concentrates the mind wonderfully. So does defeat or disaster. Even short of this, though, major change in the security situation can inspire or compel a strategic shift.

Your Money: The Missing Manual
by J.D. Roth
Published 18 Mar 2010

Lazy Portfolios The most important investment decision you can make—besides how much to invest—is where to invest. As with so many aspects of investing, there's no one option that works for every person. One factor that can help you decide how to invest your money is risk tolerance. That's a measure of how much uncertainty—and possible loss—you're willing to deal with in your investments. If your risk tolerance is high, you can handle big fluctuations in your investment returns in exchange for the possibility of large gains. If your tolerance is low, on the other hand, you'd rather not deal with the ups and downs—even if that means giving up a chance at making higher returns.

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If your tolerance is low, on the other hand, you'd rather not deal with the ups and downs—even if that means giving up a chance at making higher returns. Some of your portfolio should be in fixed-income investments like bonds and CDs, which pay interest on a regular schedule. How much depends on your goals, needs, and risk tolerance. A common rule of thumb is that the percentage of fixed-income investments in your portfolio should be equal to your age. So, if you're 30, you should have 30% in something like a bond mutual fund. (A lot of experts dislike this guideline, but it's an easy place to start.) Most (maybe all) of the rest should be in stocks. Some of these should be stocks in American companies, and some should be in foreign companies.

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If you decide to buy a lifecycle fund, buy only that fund. If you spread your money around (especially to other lifecycle funds), you defeat the whole purpose of this kind of investment. Note You don't have to pick a lifestyle fund that matches your likely retirement date. Instead, choose one that matches your risk tolerance. If the Fidelity Freedom 2035 is too aggressive for you, for example, go with the Fidelity Freedom 2025 instead. You can read more about lifecycle funds in this New York Times article: http://tinyurl.com/NYT-tdfunds. All-in-one funds If you like the idea of investing in just one fund but you don't want its asset allocation to change over time, you have a handful of other single-fund options, including: Vanguard STAR Fund (VGSTX), a collection of 11 other Vanguard mutual funds.

Unconventional Success: A Fundamental Approach to Personal Investment
by David F. Swensen
Published 8 Aug 2005

While hot stocks and brilliant timing make wonderful cocktail party chatter, the conversation-stopping policy portfolio proves far more important to investment success. The essence of the process that leads to creation of viable portfolio targets involves knowledge of basic investment principles, definition of specific investment goals, and understanding of individual risk tolerances. Fundamental investment tenets provide the framework upon which investors build portfolios with the greatest probability of meeting investor needs. Clear articulation of goals defines the task that investors desire to accomplish, while explicit specification of risk preferences outlines the parameters within which investors sensibly operate.

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Asset-class weights range from 5 to 30 percent of assets, meeting the requirement of diversification. A portfolio with assets allocated according to fundamental investment principles establishes a strong starting point for individual investment programs. Ultimately, successful portfolios reflect the specific preferences and risk tolerances of individual investors. Understanding the quantitative and qualitative characteristics of asset-class exposure creates a basis for determining which asset classes to include and in which proportions to invest. Chapter 2, Core Asset Classes, offers a primer on those asset classes likely to contribute to investor goals.

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Personal preferences play a critical subjective role in portfolio decision making. Unless an investor embraces wholeheartedly a particular portfolio structure, failure awaits. Lightly held positions invite casual reversal, exposing vacillating investors to the costly consequences of market whipsaw. By adopting asset-allocation targets that dovetail with personal risk tolerances, investors vastly increase the odds of investment success. Individual circumstances introduce important considerations to the portfolio structuring process. Nonfinancial assets, such as homes and privately held businesses, influence an investor’s desired portfolio composition. Financial liabilities, such as mortgages and personal loans, factor into investor decisions regarding asset allocation, particularly with respect to holdings of fixed income.

In Pursuit of the Perfect Portfolio: The Stories, Voices, and Key Insights of the Pioneers Who Shaped the Way We Invest
by Andrew W. Lo and Stephen R. Foerster
Published 16 Aug 2021

Any ideas or strategies discussed in this book should not be undertaken by any individual without prior consultation with a financial professional for the purpose of assessing whether the ideas or strategies that are discussed are suitable to you based on your own personal financial objectives, needs, and risk tolerance. Princeton University Press, the authors, and the subjects of this book expressly disclaim any liability for loss incurred by any person who acts on the information, ideas, or strategies discussed herein. We dedicate this book to the most perfect of all portfolios, our families: Nancy, Derek, and Wesley Linda, Jennifer, Christopher, Thomas, and Melanie CONTENTS Preface      ix The Pioneers and Their Connections      xiv   1    A Brief History of Investments      1   2    Harry Markowitz and Portfolio Selection      18   3    William Sharpe and the Capital Asset Pricing Model      51   4    Eugene Fama and Efficient Markets      81   5    John Bogle and the Vanguard Portfolio      113   6    Myron Scholes and the Black-Scholes / Merton Option Pricing Model      140   7    Robert Merton, from Derivatives to Retirement      173   8    Martin Leibowitz, from Bond Guru to Investment Strategist      199   9    Robert Shiller and Irrational Exuberance      226 10    Charles Ellis and Winning at the Loser’s Game      255 11    Jeremy Siegel, the Wizard of Wharton      281 12    So, What Is the Perfect Portfolio?      

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Any reference to an investment’s past or potential performance isn’t a recommendation or a guarantee of any specific outcome. We strongly encourage you to consult with a financial professional for the purpose of assessing whether the ideas or strategies discussed in this book are suitable to you based on your own personal financial objectives, needs, and risk tolerance. We wish you all the success in your investments, but any losses are yours alone. As in any such endeavor, we wish to acknowledge the important contributors on whose inputs and insights we have relied while stressing that any inadvertent errors are our own. We thank Jayna Cummings for carefully reviewing our preliminary drafts and general editorial support, Jeff Silberman for helpful suggestions, John Cochrane for exhaustive and insightful comments that greatly improved this book, Will Goetzmann for offering his unique historical perspective on chapter 1, Michael Nolan and John Bogle Jr. for comments related to chapter 5, senior editor Joe Jackson as well as Jackie Delaney, Josh Drake, and the excellent team at Princeton University Press, and Deborah Grahame-Smith and Yvonne Ramsey at Westchester Publishing Services.

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“Assume we are Bayesians. If we don’t have the same prior [beliefs], we shouldn’t have the same portfolios. Are we the same ages? Do we have the same risk preferences? If not, we shouldn’t have the same portfolios. The thing that is perfect for you is not perfect for me.… It depends on our ages, our objectives, our risk tolerance, and even given that, there is wiggle room.”100 The notion of a Perfect Portfolio for Markowitz is one that we all pursue, how we each individually construct our own portfolio. His work allows all of us to pursue the Perfect Portfolio that’s right for us. Markowitz gave an example of a waitress who, following his advice, had invested in a portfolio that was weighted 50 percent in stocks and 50 percent in bonds.

Cryptoassets: The Innovative Investor's Guide to Bitcoin and Beyond: The Innovative Investor's Guide to Bitcoin and Beyond
by Chris Burniske and Jack Tatar
Published 19 Oct 2017

MODERN PORTFOLIO THEORY When evaluating any investment decision, the starting point is always an individual’s financial goals, time horizon, and risk tolerance. Goals are what the funds will be used for, and the time horizon reveals when they will be used. Risk tolerance takes a bit more analysis. Each investor has a unique tolerance for the ongoing gyrations of the value of his or her portfolio. For example, do people lose sleep when their portfolio fluctuates, or do they slumber through ups and downs, dreaming of long-term gains? Once goals, time horizon, and risk tolerance are determined, one can proceed to developing an investment portfolio that maximizes returns while staying within the bounds of these parameters.

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THE WORLD OF CRYPTOASSET WALLETS Storing cryptoassets on an exchange may not always be the safest option. The risk is lower for those exchanges that have insurance, keep the majority of their assets in cold storage, and employ other best-in-class security measures like penetration testing and regular audits. For other exchanges, the risk should only be tolerated if the innovative investor is trading regularly and making use of the exchange’s capabilities, such as offering newer cryptoassets. If not trading regularly, investors should consider one of the following wallet options to store their assets safely. Broadly speaking, there are five kinds of wallets: web (cloud), desktop, mobile, hardware, and paper.

The Self-Made Billionaire Effect: How Extreme Producers Create Massive Value
by John Sviokla and Mitch Cohen
Published 30 Dec 2014

MORE EVIDENCE THAT BILLIONAIRES ARE NOT BIG RISK TAKERS We were surprised, and somewhat skeptical, by our finding that billionaires do not possess a greater tolerance for risk than the average businessperson—the cliché of the entrepreneur as risk taker is so strong and pervasive in business culture. Yet as we thought about it more and did more research, it became clear that the issue is not risk tolerance but risk attitudes. Billionaires do not overweigh failure, nor do they take irrational risks. One story that Dean Spanos, son of the billionaire Alex Spanos, shared with us when we sat down with him and his siblings in Stockton, California, underscores this idea of the kind of risks billionaires are—and are not—willing to take.

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Give emergent Producers projects or roles that stretch their skills. The ones you think have huge potential should be given a chance to try out important roles that you aren’t sure they can handle yet. You are not setting up anyone to fail. On the contrary, you are challenging them to succeed. When you give people something they have to reach for, their risk tolerance increases and you give them a chance to show themselves what they are capable of. Ideally, the Producers you challenge have either a proven track record or a palpable ability to see the upside—opportunities lost should be as salient to them as risks avoided. When deciding who should get what role or opportunity, make sure as well that the managers and leaders evaluating the options also have the appropriate risk balance in mind.

The Manager’s Path
by Camille Fournier
Published 7 Mar 2017

Finally, you graduate to a spaceship, where you can’t make quick moves and the course is set long in advance, but you’re capable of going very far and taking tons of people along for the ride. Assessing Your Role Recognize the size of the vessel you’re steering. This will be determined by a combination of the number of people in the company, the age of the company, the size of the existing business infrastructure (software, processes, and the like), and risk tolerance: 196 | THE MANAGER’S PATH People The more people you have, the more thoughtful structure you need to get everyone moving in the right direction. Leaders who want a high degree of control over their organization tend to need more structure in place to make sure their wishes are enacted. Modern companies often put their structural focus on goal setting instead of trying to make all decisions from the top, but don’t underestimate the structure you need to successfully set and communicate goals.

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Size of existing infrastructure If you have few established business rules (such as “this is how we determine what to charge our customers”) and little code or physical infrastructure (like stores, warehouses, or inventory), there is less need for structure. On the other hand, the more existing business rules and infrastructure you have, the more you’ll need clarity on how to handle them. Risk tolerance Are you in a highly regulated industry? Do you have a lot to lose if certain types of mistakes are made? Or are you in an unregulated industry, with little on the line? Your structures and processes should reflect this. In general, the more people you have depending on you and the larger the business is, the less risk you’ll be willing to take even without regulatory requirements.

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Career ladders, values, team structures—all of those are easy compared to the general angst and frustration that you can cause by adopting the wrong engineering processes for your teams. Without any process, your teams will struggle to scale. With the wrong process, they will be slowed down. Balancing the current size and risk tolerance of your team with the processes at hand is the essence of guiding good software development and operational guidelines. 212 | THE MANAGER’S PATH Ask the CTO: Engineering Process I’m the head of engineering at a small but quickly growing startup. We have very little process right now: there are no code reviews, we use Trello to manage tasks but rarely put everything into that system, and our architecture decisions tend to be made by whomever is working on the project at the time, with my sign-off.

The Investopedia Guide to Wall Speak: The Terms You Need to Know to Talk Like Cramer, Think Like Soros, and Buy Like Buffett
by Jack (edited By) Guinan
Published 27 Jul 2009

Related Terms: • Balance Sheet • Depreciation • Tangible Asset • Current Assets • Intangible Asset 14 The Investopedia Guide to Wall Speak Asset Allocation What Does Asset Allocation Mean? An investment strategy that aims to balance risk and reward by spreading investments across three main asset classes—equities, bonds, and cash—in accordance with an individual’s goals, risk tolerance, and investment horizon. Historically, different asset classes have varying degrees of risk and return and therefore behave differently over time. Investopedia explains Asset Allocation There is no simple formula to determine the proper asset allocation for every individual. However, the consensus among financial professionals is that asset allocation is one of the most important investment components.

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A group of investments such as stocks, bonds and cash equivalents, mutual funds, exchange-traded funds, and closed-end funds that are selected on the basis of an investor’s short-term or long-term investment goals. Portfolios are held directly by investors and/or managed by financial professionals. Investopedia explains Portfolio Prudence suggests that investors construct an investment portfolio in accordance with their risk tolerance and investment objectives. One should think of an investment portfolio as a pie that is divided into pieces of varying sizes that represent a variety of asset classes and/or types of investments to accomplish an appropriate riskadjusted return. For example, a conservative investor may favor a portfolio with large-cap value stocks, broad-based market index 226 The Investopedia Guide to Wall Speak funds, investment-grade bonds, and cash.

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Low levels of uncertainty (low risk) are associated with low potential returns, whereas high levels of uncertainty (high risk) are associated with high potential returns. According to the risk-return trade-off, invested money can render higher profits only if it is subject to the possibility of being lost. Investopedia explains Risk-Return Trade-Off Because of the risk-return trade-off, investors must recognize their personal risk tolerance when choosing investments. Taking on additional risk is the price of achieving potentially higher returns; therefore, if an investor wants to make money, he or she cannot cut out all risk. The goal instead is to find an appropriate balance that generates some profit but allows the investor to sleep at night.

May Contain Lies: How Stories, Statistics, and Studies Exploit Our Biases—And What We Can Do About It
by Alex Edmans
Published 13 May 2024

, Journal of the American Medical Association, 313, 663–4. 4 Carreyrou, John (2018): Bad Blood: Secrets and Lies in a Silicon Valley Startup, Penguin Random House. 5 Emerson, Gwendolyn B. et al. (2010): ‘Testing for the presence of positive-outcome bias in peer review: a randomized controlled trial’, Archives of Internal Medicine 170, 1934–9. 6 Carney, Dana R., Amy J. C. Cuddy and Andy J. Yap (2010): ‘Power posing: brief nonverbal displays affect neuroendocrine levels and risk tolerance’, Psychological Science 21, 1363–8. 7 Ranehill, Eva et al. (2015): ‘Assessing the robustness of power posing: no effect on hormones and risk tolerance in a large sample of men and women’, Psychological Science 26, 652–6. 8 Wakefield, A. et al. (1998): ‘Ileal-lymphoid-nodular hyperplasia, non-specific colitis, and pervasive developmental disorder in children’, Lancet 351 (9103): 637–41. 9 National Health and Medical Research Council (2015): ‘NHMRC information paper: evidence on the effectiveness of homeopathy for treating health conditions’, March 2015. 10 Grant Thornton (2019): ‘Corporate governance and company performance: a proven link between effective corporate governance and value creation’. 11 Fabo, Brian et al. (2021): ‘Fifty shades of QE: comparing findings of central bankers and academics’, Journal of Monetary Economics 120, 1–20. 12 Allen, David (2001): Getting Things Done, Penguin. 13 Keegan, Paul (2007): ‘How David Allen mastered getting things done’, Business 2.0 Magazine, 21 June 2007. 14 Hatmaker, Taylor (2010): ‘Twitter plans to bring prompts to “read before you retweet” to all users’, TechCrunch, 24 September 2020. 15 Pennycook, Gordon et al. (2021): ‘Shifting attention to accuracy can reduce misinformation online’, Nature 592, 590–95. 10.

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An experimental study of the mechanisms of cultural cognition’, Law and Human Behavior 34, 501–16. 8 Kahan, Dan M. et al. (2015): ‘Geoengineering and climate change polarization: testing a two-channel model of science communication’, ANNALS of the American Academy of Political and Social Science 658, 192–222. 9 Ranehill, Eva et al. (2015): ‘Assessing the robustness of power posing: no effect on hormones and risk tolerance in a large sample of men and women’, Psychological Science 26, 652–6. 10 Nyhan, Brendan and Jason Reifler (2015): ‘The effect of fact-checking on elites: a field experiment on U.S. state legislators’, American Journal of Political Science 59, 628–40. 11 Henry, Emeric, Ekaterina Zhuravskaya and Sergei Guriev (2022): ‘Checking and sharing alt-facts’, American Economic Journal: Economic Policy 14, 55–86. 12 Pennycook, Gordon et al. (2020): ‘The implied truth effect: attaching warnings to a subset of fake news headlines increases perceived accuracy of headlines without warnings’, Management Science 66, 4944–57.

Damsel in Distressed: My Life in the Golden Age of Hedge Funds
by Dominique Mielle
Published 6 Sep 2021

I was a lot less talented but a lot more hardworking, so I made up for any of my deficiencies through brute force. The first was a class in risk management taught by Darrell Duffie. Professor Duffie was instrumental in my conviction that risk tolerance is a skill, like financial analysis or bankruptcy reorganization, that you learn and refine. It is a muscle that you exercise and stretch. Risk tolerance is no different from physical endurance. Everyone has some; it’s only a matter of degree. What matters is how you quantify and manage it, or in finance terms, the amount of return you garner per unit of risk, a concept aptly named the Sharpe ratio, conceived by the 1990 Nobel laureate in economic sciences, William F.

Nudge: Improving Decisions About Health, Wealth, and Happiness
by Richard H. Thaler and Cass R. Sunstein
Published 7 Apr 2008

They found that the more stock funds the plan offered, the greater was the percentage of participants’ money invested in stocks. Many plans have attempted to help participants deal with the difficult problem of portfolio construction by offering “lifestyle” funds that blend stocks and bonds in a way designed to meet the needs of different levels of risk tolerance. For example, an employer might offer three lifestyle funds: conservative, moderate, and aggressive. These funds are already diversified, so individuals need pick only the fund that fits their risk preference. Some funds also adjust the asset allocation with the age of the participant. Such a fund assortment is a good idea and represents an excellent set of default options (if the fees are reasonable).

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The Intelligence Trap: Revolutionise Your Thinking and Make Wiser Decisions
by David Robson
Published 7 Mar 2019

Before we end our conversation, Tinsley emphasises that some risks will be inevitable; the danger is when we are not even aware they exist. She recalls a seminar during which a NASA engineer raised his hand in frustration. ‘Do you not want us to take any risks?’ he asked. ‘Space missions are inherently risky.’ ‘And my response was that I’m not here to tell you what your risk tolerance should be. I’m here to say that when you experience a near miss, your risk tolerance will increase and you won’t be aware of it.’ As the fate of the Challenger and Columbia missions shows, no organisation can afford that blind spot. In hindsight, it is all too easy to see how Deepwater Horizon became a hotbed of irrationality before the spill.

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In both lab experiments and data gathered during real NASA projects, Tinsley has found that people are far more likely to note and report near misses when safety is emphasised as part of the overall culture, in its mission statements – sometimes with as much as a five-fold increase in reporting.21 As an example, consider one of those scenarios involving the NASA manager planning the unmanned space mission. Participants told that ‘NASA, which pushes the frontiers of knowledge, must operate in a high-risk, risk-tolerant environment’ were much less likely to notice the near miss. Those told that ‘NASA, as a highly visible organization, must operate in a high-safety, safety-first environment’, in contrast, successfully identified the latent danger. The same was also true when the participants were told that they would need to justify their judgement to the board.

Investing to Save the Planet: How Your Money Can Make a Difference
by Alice Ross
Published 19 Nov 2020

That’s why you shouldn’t just copy your friends, as Caroline did with David. The company he was investing in might have made sense for him given his risk portfolio and goals – maybe he had money to burn – but it probably didn’t make sense for her. A good financial adviser will suggest investment products or styles that are in line with your financial goals and your risk tolerance. Investing ethically adds a new layer of personal decisions. That’s because, just as there’s no one answer to what investment fund you should buy or what mortgage you should get, there’s no one answer for how you should invest to save the planet. Companies and funds that are helping to mitigate climate change are choosing to do it in different ways.

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So philanthropists had to be essentially prepared to lose their money: a climate change investment gamble. It worked, and the rest was history. Echoing Breakthrough’s view on the matter, Systrom says: ‘A lot of tech in this space is really risky and you need a different kind of investor than a 5–10-year closed-end venture investor. It matches well with the attributes of philanthropy: very risk-tolerant, very long time frame for a return, if there even is one.’ How to invest in clean energy The Breakthrough Energy Ventures approach, while inspiring, is a niche form of investment available to the select few: those who can afford to tie up huge sums of capital and risk losing much of it over the next 20 years or more.

The Runaway Species: How Human Creativity Remakes the World
by David Eagleman and Anthony Brandt
Published 30 Sep 2017

You wouldn’t guess that creature would take over the planet. As with Mother Nature, we can’t know what our world will look like in the future; we don’t know what new ideas will prosper. This is why we need to water the seeds all around us, in every neighborhood. We need to establish classrooms in which options are proliferated, risk-tolerance is enabled, wrong answers are creatively mined and children are engaged and inspired to send trial balloons into the future. We need to shape individuals and build companies in which new ideas blossom, different distances are explored, trimming is part of the process and change is the norm. We don’t know where an investment in creativity will take us.

The Moral Landscape: How Science Can Determine Human Values
by Sam Harris
Published 5 Oct 2010

However, people differ significantly with respect to risk tolerance, and these differences appear to be governed by a variety of genes—including genes for the D4 dopamine receptor and the protein stathmin (which is primarily expressed in the amygdala). Believing that there can be no optimal degree of risk aversion, Burton concludes that we can never truly reason about such ethical questions. “Reason” will simply be the name we give to our unconscious (and genetically determined) biases. But is it really true to say that every degree of risk tolerance will serve our purposes equally well as we struggle to build a global civilization?

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See cultural relativism; moral relativism religion: afterlife and, 18, 33 belief in God’s existence, 6–7, 25, 158, 159, 165–66 belief in Jesus, 137–38 brain science and, 128, 152–54, 232n37, 233nn 48–49, 234n54 Burton on, 129 children and, 151 cognitive templates for, 150–51 corporal punishment in schools and, 3 Einstein on, 202n18, 236n77 in Europe, 145–46 evolution and, 147–52 God as Creator, 164 Golden Rule and, 78, 209n45 happiness from, 231–32n15 industrialization and, 145 Jesus as Son of God, 162–63, 167–68 of Judaism, 33, 38 miracles and, 167–68, 237n82 moral law and, 33, 38, 161, 169–70 morality and, 2, 33, 46, 62–63, 78, 146, 191 mysticism and, 128, 235n76 prayer and, 148, 152, 168 problems of, 6, 22–25, 157, 203n19, 227n45 prophecies and, 154–55 reason versus, 158–76 religious practices, 148–49 resurrection of the dead, 166–67 revelation and, 78 science versus, 6, 24–25 scientists’ belief in, 159–76, 237–38n99 scriptures of, 78, 89, 150, 236–37n82 sexual abuse scandal in Catholic Church, 35, 199–201n14 significance of, 154–58, 199n9 social health of least religious countries, 146–47 societal insecurity and, 146–47 soul and, 110, 158–59, 171, 179, 235n66 states of mind at core of, 165 in United States, 145–47, 149–50, 158, 234–35n64 witchcraft compared with, 129–30 See also Catholic Church; Islam religious conservatives, 5–6, 46, 53, 86, 89, 90, 158, 180–81 remembering self, 184–87 Repugnant Conclusion argument, 71 responsibility. See moral responsibility retributive justice, 1, 106, 109, 110–11 reverse inference problem, 212n71, 224n34 right and wrong. See evil; good/goodness; morality; values risk and risk tolerance, 128, 143, 226n35 Rosenhan, David L., 141–42 Ruse, Michael, 48 Rushdie, Salman, 46 Russell, Bertrand, 78 Sai Baba, Sathya, 167–68 Salk Institute, 23–24 sanity, legal definition of, 98 Savoy, R. L., 229n62 schadenfreude, 113, 222n18 schizophrenia, 127, 142, 152, 162, 195n3, 205n24 Schrödinger, Erwin, 213n77 science: belief and, 144 bias of, 47–48 concessions made to religious dogmatism by, 5–6, 22–23 consensus versus controversy in, 31, 198n6 “consilience” in, 8 definition of, 37 doubts about authority of, 47–48 Einstein on religion and, 202n18, 236n77 epistemic values of, 202n16 funding for, 24 growth of scientific knowledge, 124 hostility against, by general public and governments, 24 humility of scientists, 124 hypothesis testing in, 116 moral truth and, 1–4, 28, 46–53 narrow definition of, 29 objectivity and, 29–30, 47, 48 philosophy and, 179–81 religion versus, 6, 24–25 religious beliefs of scientists, 159–76, 237–38n99 reluctance of, to take stand on moral issues, 6–7, 10–11, 22–25, 191 tools of, 29 validity in, 143–44 values and, 1–4, 11, 28, 49–53, 143–44, 189–91, 202n16 See also brain science; brain structures; facts; neuroimaging research; and specific scientists scientism, 46–47 SCNT.

The Clash of the Cultures
by John C. Bogle
Published 30 Jun 2012

Both organizational structures honor the tenet, “Treat your customers as if they were your owners.” But only the mutual organization can, with accuracy, tack on the phrase, “because your customers are your owners.” Risk Management Strategy. In conventionally operated mutual funds, investment strategy can, in the search for higher returns, be risk-tolerant, so long as a fund’s risk—usually measured by its short-term price volatility—is consistent with the risks assumed by its peer funds. A mutual organization’s investment strategy can afford to be risk-intolerant. With costs far below competitive norms, there is little need to reach for slightly higher returns on stock funds or higher yields on bond funds.

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So this massive transfer of the two great risks of retirement plan savings—investment risk and longevity risk—from corporate balance sheets to individual households will relieve pressure on corporate earnings, even as it will require our families to take responsibility for their own retirement savings. A further benefit is that investments in properly designed DC plans can be tailored to the specific individual requirements of each family—reflecting its prospective wealth, its risk tolerance, the age of its bread-winner(s), and its other assets (including Social Security). DB plans, on the other hand, are inevitably focused on the average demographics and average salaries of the firm’s work force in the aggregate. The 401(k) plan, then, is an idea whose time has come. That’s the good news.

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As a result, DC plan investing has been unfocused, and post-work financial outcomes have been, and continue to be highly uncertain, raising fundamental questions about the effectiveness and sustainability of this individualistic pension model. 2. Traditional DB plans lump the young and the old on the same balance sheet, and unrealistically assume they have the same risk tolerance and that property rights between the two groups are clear. These unrealistic assumptions have had serious consequences. Over the course of the last decade, aggressive return assumptions and risk-taking—together with falling asset prices, falling interest rates, and deteriorating demographics—have punched gaping holes in many DB plan balance sheets, to which unfocused responses have ranged the full spectrum—from complete de-risking at one end to piling on more risk at the other . . .

The Long Good Buy: Analysing Cycles in Markets
by Peter Oppenheimer
Published 3 May 2020

And that means investors with the ability to understand cycles will find opportunities for profit.’ Over the long run, even accepting the fluctuations caused by cycles, investing can be extremely profitable. Different assets tend to perform best at different times, and returns will depend on the risk tolerance of the investor. But for equity investors in particular, history suggests that, if they can hold their investments for at least five years and, especially, if they can recognise the signs of bubbles and of inflection points in the cycle, they can benefit from the ‘long good buy’. Notes 1 Under European Community guidelines, France and Italy were required to end all exchange controls by 1 July 1990 but France implemented these six months earlier in order to show its commitment to the principles of free movement of goods, capital and people in Europe. 2 Stone, M. (2015).

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Within 15 years, it should be possible not only to deliver renewable electricity at prices that are fully competitive with fossil-fuel-based power but also to provide the low-cost backup and storage required to make it possible to run power systems that are 80%–90% reliant on intermittent renewables.2 Over the long run, even accepting the fluctuations caused by cycles, investing can be extremely profitable. Different assets tend to perform best at different times, and returns will depend on the risk tolerance of the investor. But for equity investors in particular, history suggests that, if they can hold their investments for at least 5 years and, especially, if they can recognise the signs of bubbles and of changes in the cycle, they really can enjoy a ‘long good buy’. Notes 1 SINTEF. (2013).

The Smartest Investment Book You'll Ever Read: The Simple, Stress-Free Way to Reach Your Investment Goals
by Daniel R. Solin
Published 7 Nov 2006

Invest the stock and bond portions of your portfolio in the ETFs described in this book. lllO The Heal Way Smart Investors Beat 95%of the ~Pros" 4. RebaJance your portfolio twice a year to keep your portfolio either aJigned with your original asset aJlocarion or with a new asset allocation that meets your changed investment objectives and/or risk tolerance. T hat's it. Read on for more details on each step. Chapter 34 Step 1: Determine Your Asset Allocation Over 90% ofinvestment returns are determined by how investors allocate their assets versus security selection, market timing and other foctors. -Brinson, Singer and Beebower, "Determinants of Portfolio Performance II : An Update, n Financial Analysts JournaL.

The End of the Free Market: Who Wins the War Between States and Corporations?
by Ian Bremmer
Published 12 May 2010

International investors also await the chance to invest freely in the Saudi stock market, but the 2008 financial crisis may have convinced Saudi leaders that the more connected they are to international markets, the greater their risks of economic (and political) instability. The famously low risk tolerance of senior royals and the strength of their grip on power ensure that Saudi state capitalism won’t be going away any time soon. United Arab Emirates No Middle Eastern country has profited more handsomely as a fashionable international business destination than the United Arab Emirates (UAE), thanks mainly to the determination of powerful political officials among the various ruling families to drive and control the local and federal economies.

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But if future market volatility generates large-scale social unrest, as it did briefly during a bout of global food inflation in 2008, Hosni Mubarak has both the power and the personal inclination to tighten the state’s grip on Egypt’s economic development. When it comes to reform, the president lacks his son’s risk tolerance, and market-friendly government ministers have no popular support base of their own. For the moment, Egypt is moving cautiously from state dominance of the economy toward a tentative embrace of free markets. Algeria Not so in Algeria, where the state’s grip on economic policy is tighter than ever.

Cashing Out: Win the Wealth Game by Walking Away
by Julien Saunders and Kiersten Saunders
Published 13 Jun 2022

Getting a good job, climbing the corporate ladder, buying a nice home, growing a successful business, and making financial decisions are incredibly difficult feats for the majority of Black people today. There are different qualitative variables that require us to do emotional calculus while others perform basic arithmetic. This calculus has a tremendous effect on our decision-making process, mental health, risk tolerance, family, and ultimately financial life. For instance, many of us are all too familiar with having to choose between investing for our own future and giving back to support our parents in their later years. Or having to choose between responding to a child’s developmental needs, nurturing a broken marriage, and our own self-care to keep the family afloat.

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Uncertainty is an element of risk, but your uncertainty about something doesn’t make it inherently risky. Think about it: you may be uncertain about how a date is going to turn out, but that doesn’t make meeting up for coffee a risky exercise. When it comes to investing, the phrase “no risk, no reward” exists for a reason. Rather than avoid risks altogether, you need to find your sweet spot, or risk-tolerance level. Whenever you find yourself dismissing something because it seems too risky, take the time to get specific about which aspects of the opportunity are causing your red flags, and then ask yourself whether they can be managed or mitigated. Going back to the index fund example, you need to get specific about why an investment feels like a risk.

Extreme Early Retirement: An Introduction and Guide to Financial Independence (Retirement Books)
by Clayton Geoffreys
Published 16 May 2015

Throughout the next pages, you will be learning more about passive income but the basic idea is to couple your active income with various sources of passive income. Two of the most common sources that early retirees can live with are dividend-yielding stocks and rental properties. However, every source of passive income requires an investment and nearly all kinds of investments involve risk. It is important for you to calculate your risk tolerances and consider safer options so you do not end up burning your savings. 5 Reasons You Should Consider Extreme Early Retirement You Will Have More Time Enjoying the Goodness in Life The average age when people retire is 65 or 70, and if you think about it, people spend more time working instead of living.

Good Profit: How Creating Value for Others Built One of the World's Most Successful Companies
by Charles de Ganahl Koch
Published 14 Sep 2015

This is accomplished by eliminating steps and activities that don’t add sufficient value to justify the time and expense involved, considering opportunity cost. Lastly, employees need to make decisions that reflect the company’s risk philosophy rather than their own. Any approach to business risk involves both risk preference (one’s inherent inclination toward or away from risk) and risk tolerance (the magnitude of risk that one finds acceptable). In general, since the company makes numerous financial bets and has far greater resources, the company’s risk philosophy differs markedly from any individual employee’s. For the company to continue to be successful and grow, employees must undertake far higher and larger financial risks than they would as individuals, so long as it is compliant and profitable to do so.

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With respect to embedded insurance, decision rights are dispersed throughout the businesses. This heightens the need for broad education and understanding; otherwise, we cannot identify and evaluate situations in a way that ensures consistently profitable decision making. Incentives Because individual employees and leaders usually have different risk tolerances than those of Koch Industries as a whole, we make a point of educating everyone about the company’s risk philosophy. This discipline is important because, while individual decisions that are inconsistent with the company’s risk philosophy may seem immaterial, in the aggregate they are not. Any financial losses from an incident, such as a fire, are the responsibility of the particular Koch company—so the incentive compensation of its leaders is reduced accordingly.

Stocks for the Long Run, 4th Edition: The Definitive Guide to Financial Market Returns & Long Term Investment Strategies
by Jeremy J. Siegel
Published 18 Dec 2007

By finding the points on the longerterm efficient frontiers that have a slope equal to the slope on the one-year frontier, one can determine the allocations that represent the same risk-return trade-offs for all holding periods. 34 PART 1 The Verdict of History RECOMMENDED PORTFOLIO ALLOCATIONS What percentage of an investor’s portfolio should be invested in stocks? The answer can be seen in Table 2-2, which is based on standard portfolio models incorporating both the risk tolerance and the holding period of the investor.7 Four classes of investors are analyzed: the ultraconservative investor who demands maximum safety no matter the return, the conservative investor who accepts small risks to achieve extra return, the moderate-risk-taking investor, and the aggressive investor who is willing to accept substantial risks in search of extra returns.

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This is 7 The one-year proportions (except minimum risk point) are arbitrary and are used as benchmarks for other holding periods. Choosing different proportions as benchmarks does not qualitatively change the analysis. TABLE 2–2 Portfolio Allocation: Percentage of Portfolio Recommended in Stocks Based on All Historical Data Risk Tolerance 1 Year Holding Period 5 Years 10 Years 30 Years Ultraconservative (Minimum Risk) 9.0% 22.0% 39.3% 71.4% Conservative 25.0% 38.7% 59.6% 89.5% Moderate 50.0% 61.6% 88.0% 116.2% Aggressive Risk Taker 75.0% 78.5% 110.1% 139.1% CHAPTER 2 Risk, Return, and Portfolio Allocation 35 because modern portfolio theory was established when the academic profession believed in the random walk theory of security prices.

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Also see Nicholas Barberis, “Investing for the Long Run When Returns Are Predictable,” Journal of Finance, vol. 55 (2000), pp. 225–264. Paul Samuelson has shown that mean reversion will increase equity holdings if investors have a risk aversion coefficient greater than unity, which most researchers find is the case. See Paul Samuelson, “Long-Run Risk Tolerance When Equity Returns Are Mean Regressing: Pseudoparadoxes and Vindications of ‘Businessmen’s Risk’” in W. C. Brainard, W. D. Nordhaus, and H. W. Watts, eds., Money, Macroeconomics, and Public Policy, Cambridge: MIT Press, 1991, pp. 181–200. See also Zvi Bodie, Robert Merton, and William Samuelson, “Labor Supply Flexibility and Portfolio Choice in a Lifecycle Model,” Journal of Economic Dynamics and Control, vol. 16, no. 3 (July–October 1992), pp. 427–450.

Science Fictions: How Fraud, Bias, Negligence, and Hype Undermine the Search for Truth
by Stuart Ritchie
Published 20 Jul 2020

This powerful posture would give you a psychological – and hormonal – boost. An experiment by Cuddy and her colleagues in 2010 had found that, compared to those who were asked to sit with arms folded or slouched forward, people who were made to power-pose not only felt more powerful, but had higher risk tolerance in a betting game and had increased levels of testosterone and decreased levels of the stress hormone cortisol.15 Cuddy’s message that people who used the two-minute power pose could ‘significantly change the outcomes of their life’ struck a chord: hers became the second-most-watched TED talk ever, with over 73.5 million views in total.16 It was followed in 2015 by Cuddy’s New York Times-bestselling self-help book, Presence, whose publisher informed us that it presented ‘enthralling science’ that could ‘liberate [us] from fear in high-pressure moments’.17 Provoking quite some degree of mockery, the UK’s Conservative Party seemed to take Cuddy’s message to heart, with a spate of photos appearing that same year of their politicians adopting the wide-legged stance at various conferences and speeches.18 Alas, also in 2015, when another team of scientists tried to replicate the power-posing effects, they found that while power-posers did report feeling more powerful, the study ‘failed to confirm an effect of power posing on testosterone, cortisol, and financial risk’.19 The critical spotlight that was activated in the replication crisis has also been aimed at older pieces of psychology research, with similarly worrying results.

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Kahneman also wrote an open letter to social psychologists, telling them that he saw a ‘train wreck looming’ and urged them to change the way they went about their research. A copy can be found at the following link: https://go.nature.com/2T7A2NV 15.  Dana R. Carney et al., ‘Power Posing: Brief Nonverbal Displays Affect Neuroendocrine Levels and Risk Tolerance’, Psychological Science 21, no. 10 (Oct. 2010): pp. 1363–68; https://doi.org/10.1177/0956797610383437 16.  The total of the 56 million views on the TED website and the additional 17.6 million views on YouTube – numbers at the time of writing in February 2020. The talk was originally titled ‘Your Body Language Shapes Who You Are’ but at some point, post-replication crisis, it has been renamed ‘Your Body Language May Shape Who You Are’.

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The quotation is from the publisher page at the following link: https://www.littlebrown.com/titles/amy-cuddy/presence/9780316256575/ 18.  Homa Khaleeli, ‘A Body Language Lesson Gone Wrong: Why is George Osborne Standing like Beyoncé?’ Guardian, 7 Oct. 2015; https://www.theguardian.com/politics/shortcuts/2015/oct/07/who-told 19.  Eva Ranehill et al., ‘Assessing the Robustness of Power Posing: No Effect on Hormones and Risk Tolerance in a Large Sample of Men and Women’, Psychological Science 26, no. 5 (May 2015): pp. 653–56; https://doi.org/10.1177/0956797614553946, p. 655.The power-posing debate has gone on and on since then. A 2017 review concluded that power-posing effects are ‘hypotheses currently lacking in empirical support’.

Adaptive Markets: Financial Evolution at the Speed of Thought
by Andrew W. Lo
Published 3 Apr 2017

The idea that investors don’t like risk is at the very foundation of financial theory and practice. Economists speak of risk/reward trade-offs all the time, in the same way that we acknowledge that there are no free lunches, and you don’t get something for nothing. However, we also understand that not everyone has the same level of risk aversion and tolerance: there are conservative investors who put their money in T-Bills, and then there are hedge fund managers who make billion-dollar bets on the future price of a security. What determines an individual’s level of risk aversion? The traditional economist’s response is that risk aversion is a “deep parameter,” a fundamental trait of an individual.

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The starting point for most economic analysis is the individual’s “utility function,” a mathematical yardstick that measures a consumer’s level of happiness or satisfaction as a function of the amount consumed. The standard definition of risk aversion is embedded in this function. Some people have very risk-averse utility functions, while others have very risk-tolerant functions, but economists rarely ask why or how. That would be like asking why some people like fish instead of chicken; they just do. But from the perspective of the Adaptive Markets Hypothesis, we can ask why—and more importantly, how—such behaviors arise. Imagine a tribble faced with two possible actions, a and b (not necessarily the valley or plateau of our earlier example), where a yields three offspring for sure, and b is a lottery ticket that offers a 50 percent chance of two offspring and a 50 percent chance of four offspring.

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There are fancier heuristics that attempt to reduce your risk as you get closer to retirement, like investing a percentage of 100-minus-your-age in stocks and the rest in bonds, so a twenty-year-old will have 80 percent in stocks, while a sixty-five-year-old will only have 35 percent in stocks. The idea is to adjust your asset allocation to suit your risk tolerance and your long-run investment objectives. Principle 5 makes your asset allocation decision even simpler: just hold stocks for the long run. This principle is based on the hugely influential book Stocks for the Long Run, written by the Wharton financial economist Jeremy Siegel.2 First published in 1994, this book is now in its fifth edition, and has become the “buy and hold Bible” of the investment management industry.

Liftoff: Elon Musk and the Desperate Early Days That Launched SpaceX
by Eric Berger
Published 2 Mar 2021

When Shotwell began selling the Falcon 1 rocket, customers were desperate for cheaper small-launch service. Today, there are half a dozen well-capitalized companies with strong technical plans. Customers can afford to wait and see who succeeds before signing on, and they’re much less tolerant of risk. “That’s one of the things Elon brought to SpaceX—risk tolerance,” Chinnery said. “He didn’t want to fail, but he wasn’t afraid of it. And I think in a lot of other aerospace businesses, there still is that fear of failure, they want to be better than that.” With so many competitors, companies today really can’t afford to fail. So they go a little bit further.

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See also Omelek site Redstone Arsenal, 56 Reduced-gravity flight, 141–42 Reingold, Jennifer, 86 Relativity Space, 248, 251 Rémy Martin, 27–29, 145 Renaissance Hotel, 12–13 Ressi, Adeo, 9–10, 12, 237 Reusable launch systems, 230–34 Richichi, Jeff, 168, 231–32, 262 Ride, Sally, 50, 99–100 Riley, Talulah, 216 “Risk tolerance,” 245 Rocket Boys (Hickam), 153 Rocketdyne, 32, 33, 126. See also Aerojet Rocketdyne Rocket Lab, 236, 245 Rocket reuse, 230–34 Role models, 99, 100 Romo, Eric, 155, 261 Ronald Reagan Ballistic Missile Defense Test Site, 55, 58, 67, 169. See also Omelek site Rotary Rocket, 142 Roth, Ed, 184 Sales, 95–116 Scaled Composites, 39–40 Scorpius, 79–80 Sea Launch, 125, 126 Seal Beach, 53 Searles, Rachel, 21, 22 Sea salt spray and corrosion, 121–23, 233 Sensors, 124, 136 September 11 attacks (2001), 98–99 Sexism, 51, 62 Sheehan, Mike, 185, 190–91, 193, 195–96 Shotwell, Gwynne, 255–56 at Aerospace Corporation, 102 Air Force and, 61–62 background of, 99–101 at Chrysler, 101–2 Falcon 1’s Washington, D.C. debut, 105 Flight One failure, 120 Flight Four launch, 202–3 success, 210–11 hiring of, 95–98 Lockheed Martin and, 112–13 at Microcosm, 50, 95, 96, 102 Omelek site, 54–55 Quake parties, 17–18 sales, 17, 54–55, 96, 97–98, 103–4, 106–7, 112–14, 115, 116, 216, 220 222 Shotwell, Robert, 202–3, 210 Sloan, Chris, 262 Slosh baffles, 127–28, 138, 140 Society of Women Engineers, 100 Solar sails, 10, 164 Soyuz, 93 Space and Missile Defense Command, U.S.

Test Gods: Virgin Galactic and the Making of a Modern Astronaut
by Nicholas Schmidle
Published 3 May 2021

Phelps, Michael plastic-fuel motor Pomerantz, William Powell, Colin Principal, Victoria problems, “bounded” vs. “unbounded” propulsion propulsion system Putin, Vladimir Radian Aerospace Raibeck, Dave Rainey, Steve reaction control system (RCS) Reagan, Ronald Redstone Rich, Ben Richardson, Bill The Right Stuff (film) risk tolerance/aversion rocket fuel rocket motors Branson donates motor to National Air and Space Museum hybrid motors plastic-fuel motor rubber-fuel design motor rocket systems. See also rocket motors Rodgers, June Scobee Rosepink, Deborah Rosepink, Ron rubber-fuel design motor Russia Rutan, Burt Allen and Branson and Branson honors Colby and “cold flow” test explosion and documentary about NASA and Presidential Citizen’s Medal received from Reagan receives medallion from Aero Club de France rocket-powered flight test and Schmidle’s “Rocket Man” profile of Stucky in New Yorker and SkiGull and SpaceShipOne and Stucky and takes medical leave Trump and wins X Prize Rutan, Tonya Sagan, Carl Salina, Kansas Saling, Michelle Salter, James, The Hunters Salty Dogs SAPs (special-access programs) Saturn IB Saturn V Saudi Arabia Scaled Composites accused of sloppiness “cold flow” test explosion at crash of SpaceShipTwo and as engineering cult design of SpaceShipOne and party in 2009 and PR and rocket-powered flight test Rutan’s philosophy at SETP tour and SpaceShipOne and SpaceShipTwo and Stucky and Virgin Galactic and Schmidle, Bohan Schmidle, Nicholas (author) background of centrifuge training and at ceremony honoring Stucky and Sturckow childhood of compartmentalization and embeds with Virgin Galactic field trip to Mojave and in Idaho invited to Virgin Islands by Branson meets Stucky in Pakistan Patterson and “Rocket Man” Shane and Stucky and Sturckow and takes sons to National Air and Space Museum trip to Mojave with family Virgin Galactic’s adversarial turn against writing for New Yorker Schmidle, Oscar Schmidle, Pamela Schmidle, Robert (“Rooster”) in Bosnia at ceremony honoring Stucky and Sturckow goes down over Japan Gulf War and receives Distinguished Flying Cross return from Gulf War Stucky and Sturckow and Schwarzenegger, Arnold science Scobee, Dick “scoot shelters” Scott, David scramjets SCUM truck (Scaled Composite Unit Mobile) Seguin, Elliot September eleventh attacks Sex Pistols Shane, Doug Shenzhou Shepard, Alan Shotwell, Gwynne Siebold, Peter Siebold, Traci Sierra Nevada Corporation SkiGull Skunk Works Smith, Michael Smith, Ned Abel Society of Experimental Test Pilots solar wind Soviet Union.

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Louis Sputnik spy planes SR-71 stability augmentation system stability issues “sterile cockpit rules” Stinemetze, Matt Stofan, Ellen Storms, Harrison Stucky, Dillon first SpaceShipTwo space flight and paragliding and reconnects with father Stucky, Joan Stucky, Lauren Stucky, Mark (“Forger”) 13211 Stucky asteroid named for addresses stability issues in Air Force assigned to F-117 squadron attention to weather becomes mortgage broker centrifuge training and ceremony in his honor childhood in Salina, Kansas in China Lake, California completes Top Gun co-writes Paragliding: A Pilot’s Training Manual crash of SpaceShipTwo and delivers commencement address in Salina, Kansas dietary regimen of divorces Joan at Dryden Flight Research Center earns Navy commendation medal elation about SpaceShipOne Ericson and fails to make final cut for Astronaut Candidate Program first SpaceShipTwo space flight and Fischer and G-LOC experience hang gliding in 1974 hired by Scaled h-stab problem and in Idaho interviewed by O’Donoghue in Gulf War in Iraq War job offer at Aerion joins Air Force reserves joins United Airlines at Kansas State University knee surgery and leaves Marines looks at real estate in New Mexico loses his job with United Airlines Mackay and in Marines medical exams and Moses and mother and moves in with Agin moves to Houston move to New Mexico and at niece’s funeral organizes rescue effort for Hunt in Palmdale, California paragliding accidents and party in 2009 and presentation at SETP symposium propulsion system and at Quantico quits NASA reaction control system (RCS) and receives award from Air Force receives Iven C. Kincheloe Award from Society of Experimental Test Pilots risk tolerance and rocket-powered flight test and Rutan and Saling and at Scaled Composites Schmidle (author) and Schmidle (Robert) and Schmidle’s “Rocket Man” profile in New Yorker SETP and shunned by Scaled Siebold and in SkiGull skydiving and at Space Mirror Memorial SpaceShipTwo and SpaceShipTwo’s final glide flight (2018) before rocket-powered flights test flight with Beth Moses on board and as test pilot for NASA as test pilot in Middle East tours Scaled Composites in training squadron in Yuma, Arizona Virgin Galactic and wager with Fischer in Washington, DC at winging ceremony Stucky, Paul Stucky, Sascha Sturckow, Rick (“C.J.

Triumph of the Optimists: 101 Years of Global Investment Returns
by Elroy Dimson , Paul Marsh and Mike Staunton
Published 3 Feb 2002

Beta measures the risk of the asset relative to the market portfolio, and beta estimates are widely available in most stock markets. The average beta for all stocks in a market is, by definition, equal to one. So the equity market risk premium is fundamental in determining CAPM expected returns. The CAPM links the equity market risk premium to the risk tolerance of investors. The historical reward to equity market investment has, in the United States, looked large. But has it been excessive? The CAPM emphasizes how stock market investments contribute to the level of and uncertainty about an investor’s wealth. To say whether the premium has been excessive, we need to look beyond fluctuations in an investor’s wealth.

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We explore some of the implications of our research below. 14.4 Implications for individual investors In every country studied in this book, equities have over the long haul beaten bonds and bills. This outperformance is not simply a pattern from the past; it reflects the theory that risky securities should command a lower price than otherwise similar safe securities. Risky equities can therefore be expected to offer a higher expected return. For risk-tolerant investors, that makes equities a desirable long-term investment. On the other hand, we have provided new estimates of equity risk premia that are, on balance, lower than previous research had suggested. What does this suggest for financial markets? We conclude this chapter with a set of implications of our research for investors.

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We start with the implications of our work for asset allocation. The classic US asset allocation, as described by Loeb (1996) and others, is one-tenth in cash, with risky assets split roughly 60 percent in stocks and 40 percent in bonds. While most advisors will then modify such recommendations in the light of an investor’s risk tolerance and investment horizon, many observers have puzzled about this 60:40 stock:bond mix. The fact is, almost any analysis of the historical record suggests allocating more than 60 percent to stocks, and less than 40 percent to bonds. Stocks have displayed a high average return, and low-return bonds have been too volatile to justify a large weighting in an optimized portfolio.

The Politics of Bitcoin: Software as Right-Wing Extremism
by David Golumbia
Published 25 Sep 2016

Gox don’t happen in the future, it may be useful as a global system of payments (but so are generally non-transformative technologies like PayPal and Dwolla). But that will hardly shake world political structures at their foundations. If it remains outside of all forms of both value and transactional regulation, Bitcoin will continue to be a very dangerous place for any but the most risk-tolerant among us (i.e., the very wealthy, whose interest in Bitcoin should indicate to advocates how and why it cannot be economically transformative) to put their hard-earned money. It is beyond ironic, indeed it is symptomatic, that Bitcoin has experienced dramatic deflationary and inflationary spirals just as it is being promoted as a corrective to inflation and deflation.

Market Sense and Nonsense
by Jack D. Schwager
Published 5 Oct 2012

For example, what if investors have a choice between Managers C and D in Figure 8.1, but there are practical impediments to increasing the exposure of Manager D? Now return and risk are inextricably bundled, and investors must choose between the higher-return/higher-risk profile of Manager C and the lower-return/lower-risk profile of Manager D. It might seem that risk-tolerant investors would always be better off with Manager C. Such investors might say, “I don’t care if Manager C is riskier, as long as the end return is higher.” The flaw in this premise is that investors who start with Manager C at the wrong time—and that is easy to do—may actually experience significant losses rather than gains, even if they maintain the investment, and especially if they don’t.

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The 2DUC chart implies that the average worst-case scenario for investors with Manager E is 10 times worse than with Manager F; that is a lot of extra risk for a 1.3 percent difference in the average annual compounded return. Based on performance, it would be difficult to justify choosing Manager E over Manager F, even for the most risk-tolerant investor. Figure 8.12 2DUC: Manager E versus Manager F Investment Misconceptions Investment Misconception 23: The average annual return is probably the single most important performance statistic. Reality: Return alone is a meaningless statistic because return can always be increased by increasing risk.

Ludicrous: The Unvarnished Story of Tesla Motors
by Edward Niedermeyer
Published 14 Sep 2019

Though other automakers offer versions of lane-keep assist, they either don’t allow or heavily limit hands-free operation due to safety concerns. Though testing has shown that Autosteer performs better than competitive lane-keep assist systems, the key to Autopilot’s success was not an overwhelming technological advantage but Tesla’s risk tolerance. In addition to allowing longer periods of hands-free driving than other automakers, Tesla permitted owners to use the system on any road even while warning that the system was only safe on divided highways with no cross traffic. While Tesla’s official representatives consistently emphasized the fact that Autopilot was not autonomous and required constant driver engagement, Musk had always danced around the contradiction at the heart of the Autopilot gambit.

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That Citroën does not dominate the car market of the early twenty-first century takes nothing away from the influence, innovation, and beauty of its landmark vehicles. But it does illustrate an important point: the innovator is often a transitional figure. Once the impact of its vision is understood, it often falls to less fanciful and risk-tolerant players to translate the vision into more accessible and prosaic forms. This seems likely to become Tesla’s fate: its place in the history books is secure, but its present is coming under direct assault from more experienced, pragmatic automakers. At the same time, its future is being disrupted by a fresh crop of innovators who are leaving the entire idea of the car behind.

How Medicine Works and When It Doesn't: Learning Who to Trust to Get and Stay Healthy
by F. Perry Wilson
Published 24 Jan 2023

The idea of a randomized trial represents a fundamental shift from traditional medical practices, which focus on the relationship between an individual doctor and an individual patient. Under ordinary circumstances, a doctor formulates a treatment plan based on the characteristics of a specific patient: the patient’s risk factors, risk tolerance, disease status, other medications, and a host of other factors born out of long experience. The patient and doctor discuss the recommendation, modify it, and, eventually, implement it. Treatment is personal. Randomized trials, in contrast, are fundamentally impersonal. Indeed, that is perhaps their greatest strength.

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Doctors can’t force patients to do anything, but key to building and maintaining trust is to come to a decision that both parties understand (even if they don’t fully agree with it). The language of the “number needed to treat” can be an incredibly useful tool to discuss the real risks and benefits of a medication choice. It allows you to say “Yes, I understand that this medication may save my life. I also understand that chances are I’ll be fine without it, and given my risk tolerance, I am willing to roll the dice on this.” Your doctor may not agree, but they are not the one who has to pay for or take the medication. In the end, it is your decision. You may decide even a 1 percent chance of a better outcome is worth it. Our primary goal as physicians is to make sure you are making that decision with the real information.

The Revolution That Wasn't: GameStop, Reddit, and the Fleecing of Small Investors
by Spencer Jakab
Published 1 Feb 2022

In the summer of 2021, Robinhood agreed to the largest-ever fine imposed by brokers’ own regulator, the Financial Industry Regulatory Authority (FINRA). Part of the complaint said that Robinhood used bots to approve people for options trading. FINRA gave the example of a twenty-year-old who said he had low risk tolerance and little experience and was rejected. Three minutes later, he changed his risk tolerance to medium and said he had three years of trading experience—difficult to have at age twenty—and was approved to trade options.[21] Robinhood had good reason to encourage the instruments’ use, though. “They get paid a lot more for options trading,” said Roper.

Fortune's Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street
by William Poundstone
Published 18 Sep 2006

To answer that, you have to compute the variance of the wheels’ returns. I’ll spare you the trouble—the variance of the wheels increases from left to right. So does the arithmetic mean return. Consequently, Markowitz theory refuses to decide among these three wheels. All are legitimate choices. A risk-tolerant investor looking for the highest return might choose the third wheel. A conservative investor willing to sacrifice return for security might choose the first. The middle wheel is good, too, for people in the middle. The last bit of advice is particularly hard to swallow. Most would agree that the middle wheel is the riskiest because it alone poses the danger of total loss.

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The familiar mean-variance mapping is not a good way of visualizing this type of problem, noted the University of North Carolina’s Richard McEnally. In the mean-variance mapping (left), return rises as a straight line as leverage increases. Risk rises, too, but this diagram shows no reason why a very aggressive and risk-tolerant trader should not increase leverage to any degree obtainable. In the Kelly mapping (right), the line of return is a curve that boomerangs back to zero and negative returns. Two Views of Risk and Return It is not a question of which mapping is “right.” Both mappings are right for different contexts.

Trading and Exchanges: Market Microstructure for Practitioners
by Larry Harris
Published 2 Jan 2003

The last tranche, which is usually called the Z tranche, gets whatever is left over. It is obviously the most risky tranche. CMOs are also called real estate mortgage investment conduits (REMICs). Companies issue CMOs to distribute mortgage prepayment risk and interest rate risk among investors with varying degrees of risk tolerance. All debt instruments are collectively known as fixed-income products. 3.3.3 Derivative Contracts Derivative contracts are instruments that derive their values from the values of the underlying instruments upon which they are based. They are contractual agreements between buyers and sellers that specify the exchange of certain privileges and liabilities.

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Economists sometimes call utilitarian traders liquidity traders because they need liquidity to accomplish their goals. TABLE 8-3. Utilitarian Trader Summary Utilitarian traders want to trade instruments that best solve their problems. Investors trade only instruments that expose them to risks they can tolerate. Asset exchangers trade only for assets that they need. Hedgers trade instruments that are closely correlated to the risks they face. Gamblers trade instruments that excite them. 8.2 PROFIT-MOTIVATED TRADERS Profit-motivated traders trade only because they expect to profit. Like all traders, they profit if they buy low and sell high.

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• The inferences dealers make about future order flows create a spread between their bid and ask prices. This spread is called the adverse selection spread component. • The adverse selection spread component increases with trade size. 13.15 QUESTIONS FOR THOUGHT • Which traders do you expect are more risk averse, dealers or brokers? • Which traders do you expect make better dealers, risk tolerant (mildly risk-averse) individuals or very risk-averse individuals? • Are preferencing arrangements good for brokerage customers? • How can dealers control the risk of trading with informed traders? • Could a proprietary trading firm program a computer to trade profitably as a dealer? What risks would such a trading operation encounter?

Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud
by Ben McKenzie and Jacob Silverman
Published 17 Jul 2023

Some government agencies shared those suspicions, with Celsius facing legal action in multiple states: New Jersey, Alabama, and even Texas. To set up a promo stand in a state where your company was currently embroiled in litigation against that state took a certain kind of gall. But gall was in abundant supply in the risk-tolerant world of crypto. Alex Mashinsky, the CEO of Celsius, wasn’t immune to this kind of hubris. Celsius’s chief financial officer had been arrested in Israel in November 2021 on charges of fraud, but Mashinsky refused to even discuss the issue publicly. Instead, he continued to tout the Celsius brand on Twitter, at conventions, and across crypto media.

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Stepping back, I felt a growing civic concern after I started to see too many similarities between the unregulated crypto markets and the subprime crisis of 2007/08 that had nearly brought down the entire economy. My hunch was that crypto, which was born out of the ashes of the Global Financial Crisis, was now, ironically, recreating the circumstances that had led to the previous crisis. Risk-tolerant crypto traders and exchanges owners were stacking leverage on leverage (or fake dollars on top of fake dollars) to extract returns—in real dollars—on their investments. Tethers were being printed by the billions and issued to a very small group of important players like crypto mogul Justin Sun, who issued a token called TRON, along with sophisticated trading firms like Cumberland and Alameda Research, the Bahamas-based outfit owned by Sam Bankman-Fried, known in the crypto world (and now beyond) as SBF.

High-Frequency Trading: A Practical Guide to Algorithmic Strategies and Trading Systems
by Irene Aldridge
Published 1 Dec 2009

The information asymmetry cost—a market maker trading with wellinformed traders may often be forced into a disadvantaged trading position. As a result, Stoll’s (1978) model predicts that the differences in bidask spreads between different market makers are a function of the market makers’ respective risk tolerances and execution set-ups. In Ho and Stoll (1981), the market maker determines bid and ask prices so as to maximize wealth while minimizing risk. The market maker controls his starting wealth positions, as well as the amounts of cash and inventory held on the book at any given time. As in Garman (1976), the arrival rates 138 HIGH-FREQUENCY TRADING of bid and ask orders are functions of bid and ask prices, respectively.

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Determining organizational goals for risk management is hardly a trivial endeavor. To effectively manage risk, an organization first needs to create clear and effective processes for measuring risk. The risk management goals, therefore, should set concrete risk measurement methodologies and quantitative benchmarks for risk tolerance associated with different trading strategies as well as with the organization as a whole. Expressing the maximum allowable risk in numbers is difficult, and obtaining organization-wide agreement on the subject is even more challenging, but the process pays off over time through quick and efficient daily decisions and the resulting low risk.

The Permanent Portfolio
by Craig Rowland and J. M. Lawson
Published 27 Aug 2012

If you're not a market timer but you really think stocks are a good deal, then buy some extra of a total stock market index fund. Or if you feel like doing nothing, then hold it all in cash until something catches your attention. A word of warning though: All investors have different risk tolerances and unfortunately many investors don't find out what their risk tolerance actually is until after it has been exceeded by unforeseen losses. The Variable Portfolio should be approached with caution and an investor should make sure that the money he allocates to it is money that he truly can afford to lose if his speculative bets don't turn out as expected.

The Bitcoin Standard: The Decentralized Alternative to Central Banking
by Saifedean Ammous
Published 23 Mar 2018

Hence, it encourages deferred consumption, resulting in lower time preference. A currency that depreciates in value, on the other hand, leaves citizens constantly searching for returns to beat inflation, returns that must come with a risk, and so leads to an increase in investment in risky projects and an increased risk tolerance among investors, leading to increased losses. Societies with money of stable value generally develop a low time preference, learning to save and think of the future, while societies with high inflation and depreciating economies will develop high time preference as people lose track of the importance of saving and concentrate on immediate enjoyment.

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The debates of academia are almost entirely irrelevant to the real world, and its journals' articles are almost never read by anyone except the people who write them for job promotion purposes, but the government bezzle indefinitely rolls on because there is no mechanism by which government funding can ever be reduced when it does not benefit anybody. In a society with sound money, banking is a very important and productive job, where bankers perform two highly pivotal functions for economic prosperity: the safekeeping of assets as deposits, and the matching of maturity and risk tolerance between investors and investment opportunities. Bankers make their money by taking a cut from the profits if they succeed in their job, but make no profit if they fail. Only the successful bankers and banks stay in their job, as those that fail are weeded out. In a society of sound money, there are no liquidity concerns over the failure of a bank, as all banks hold all their deposits on hand, and have investments of matched maturity.

Nomad Capitalist: How to Reclaim Your Freedom With Offshore Bank Accounts, Dual Citizenship, Foreign Companies, and Overseas Investments
by Andrew Henderson
Published 8 Apr 2018

They also have smaller market capitalization, higher volatility, fewer financial regulatory institutions, yet are still open and accessible to foreign investors and entrepreneurs. The risk involved in pursuing these final frontiers is what keeps a lot of investors and businesses from entering the market within these countries. However, for the risk-tolerant, this means that you will have open access to countries with great fundamentals for high returns and incredible business success. The Benefits of Frontier Market Entrepreneurship There are numerous benefits to doing business in a frontier market, let’s examine just a few of them. Contribute to Positive Development From a less profit-minded perspective, the first benefit of frontier market entrepreneurship is the knowledge that you are contributing to the growth and development of other countries.

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The best and often only way to learn about the opportunities in any given country is not from reading blogs or calling lawyers but from boots-on-the-ground intelligence. You cannot effectively scout out a great business idea without being there in person. While books like this can serve as a tool to provide guidance, suggest ideas, and point you in the best direction for your interests and risk tolerance, they will not replace seeing an opportunity with your own eyes. Setting foot in a new place gives you the chance to observe trends that are going on there. You can read about these places all you want, but things only really come into focus once you can personally see for yourself what you have been reading about.

Escape From Model Land: How Mathematical Models Can Lead Us Astray and What We Can Do About It
by Erica Thompson
Published 6 Dec 2022

We may still disagree entirely, but it will at least be clear that our disagreement results from different value judgements about the outcomes, for example, present versus future costs, or the role of government versus that of the individual, or the appropriate balance of freedom with responsibility to others. All real-world decisions are necessarily a question of values: what is the intended outcome? Who will benefit? Who will pay? What collateral damage is acceptable? What risks are tolerable? A particular difficulty for the construction of common ground on which to hold discussions about the future is the way in which models that project future conditions entangle facts with values. When models are presented as best-available statements of physical law, their projections are a kind of conditional fact (‘if carbon dioxide emissions continue to rise, then X will happen’; ‘if everyone wears a mask to reduce disease transmission, then Y will happen’).

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Conviction narratives In simple decision-making situations, we know roughly what outcomes will result from our actions, and the question is how to scan the possible outcomes in as efficient a way as possible to identify the actions that will result in the best outcome. There may be some uncertainty about the outcomes and this can be taken into account by including a level of risk tolerance in the definition of what is meant by the ‘best’ outcome. This is what is often called ‘rational decision-making’ and frameworks for arriving at the ‘best’ outcome in many different kinds of situations are well researched. Of course, very few real-world decisions are so simple. In deciding which of two job offers to accept, for example, you are not only weighing up the quantified benefits offered by each position, but also the overall career prospects, the attractiveness of the location, the impact on your spouse or family, the effect on your existing friendships if you move away and so on.

Red-Blooded Risk: The Secret History of Wall Street
by Aaron Brown and Eric Kim
Published 10 Oct 2011

This chapter explains the two ideas and their interaction in a historical counterfactual. What if Kelly had been in the University of Chicago library one fateful afternoon when Harry was musing over some stock tables? What if Harry had met Kelly? Kelly Conventional wisdom says risk decisions should be made by subjective preference: your risk tolerance or your utility function. But in 1956, John Kelly published a contrary result: that there is a calculable amount of risk that always does best in the long run. Most people think that taking more risk increases the probability of both very good and very bad outcomes. Kelly showed that beyond a certain point, more risk only increases the probability of bad outcomes.

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Since the high Sharpe ratio strategies have limited capacity but grow so quickly that initial investment is almost irrelevant, they are appropriate for people investing their own money. Sharpe ratios around 0.5 make good hedge fund strategies. The lower Sharpe ratios are useful for large institutions with cheap capital and high risk tolerance. Card counters gravitated to very high Sharpe ratio strategies. When I say these have limited capacity, I don’t mean there are always opportunities to invest a small amount in them. More commonly, opportunities come up unpredictably. For that reason the strategies are sometimes referred to as “event driven.”

Mathematics for Economics and Finance
by Michael Harrison and Patrick Waldron
Published 19 Apr 2011

Agents with different wealths (but the same increasing, strictly concave, VNM utility) hold the same risky unit cost portfolio, p∗ say, (but may differ in the mix of the riskfree asset and risky portfolio) i.e. ∀ portfolios p, wealths W0 , ∃λ s.t. h  E u W0 rf + λW0 p∗ > (r̃ − rf 1) i h  i ≥ E u W0 rf + p> (r̃ − rf 1) (6.3.22) ⇐⇒ Risk-tolerance (1/RA (z)) is linear (including constant) i.e. ∃ Hyperbolic Absolute Risk Aversion (HARA, incl. CARA) i.e. the utility function is of one of these types: • Extended power: u(z) = 1 (A (C+1)B + Bz)C+1 • Logarithmic: u(z) = ln(A + Bz) A • Negative exponential: u(z) = − B exp{Bz} where A, B and C are chosen to guarantee u0 > 0, u00 < 0. i.e. marginal utility satisfies u0 (z) = (A + Bz)C or u0 (z) = A exp{Bz} (6.3.23) where A, B and C are again chosen to guarantee u0 > 0, u00 < 0.

The New Trading for a Living: Psychology, Discipline, Trading Tools and Systems, Risk Control, Trade Management
by Alexander Elder
Published 28 Sep 2014

At this point, I only want to make clear that risk management is the essential part of serious trading. Forget the days when you would look at the ceiling and say, “I'll trade 500 shares,” “I'll trade a thousand shares,” or any other arbitrary number. Later in this book, you'll learn a simple formula for sizing your trades, based on your account and risk tolerance. At the time of this writing, I have three strategies that I trade. My favorite is a false breakout with a divergence. My second choice is a pullback to value during a powerful trend—that's the strategy of the trade shown on the screen (Figure 38.1). Last, I occasionally “fade an extreme”—bet on a reversal of an overstretched trend.

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For example, you may decide that once the breakeven stop is in place, you'll protect a third of your open profit. If the open profit on the trade described above rises to $600, you'll move up your stop, so that the $200 profit is protected. These levels aren't set in stone. You may choose different percentages, depending on your level of confidence in a trade and risk tolerance. As a trade moves in your favor, your remaining potential gain begins to shrink, while your risk—the distance to the stop—keeps increasing. To trade is to manage risk. As the reward-to-risk ratio for your winning trades slowly deteriorates, you need to begin reducing your risk. Protecting a portion of your paper profits will keep your reward-to-risk ratio on a more even keel.

The Start-Up of You: Adapt to the Future, Invest in Yourself, and Transform Your Career
by Reid Hoffman and Ben Casnocha
Published 14 Feb 2012

This is a main reason many young people start companies, travel around the world, and do other relatively “high-risk” career moves: the downside is lower. If something worthwhile will be riskier in five years than it is now, be more aggressive about taking it on now. As you age and build more assets, your risk tolerance shifts. Pursue Opportunities Where Others Misperceive the Risk There will be times when what’s risky to someone else is not risky to you because your particular characteristics and circumstances make it a different analysis. Risk is personal. But there will also be times when people like you—people with similar assets, aspirations, and operating within the same market realities—will perceive something as riskier than it actually is.

How to Retire the Cheapskate Way
by Jeff Yeager
Published 1 Jan 2013

After all, if you can live comfortably on less money, you don’t need to gamble so aggressively on high-risk investments. The preservation of capital becomes the overriding consideration. Create an individualized asset allocation plan, a plan for what types of investments make sense for you and involve whatever level of risk you can tolerate and still sleep well at night. Remember, in the very act of diversification there is, almost without exception, greater security. “Ton-tog-an-y. Isn’t that Lakota for ‘Don’t put all your eggs in one basket’?” Maintain appropriate insurances to protect yourself and your assets. Take care of your stuff.

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That’s when I started to think of it as ‘making at a living’ … starting small, risking nothing but my time, and not worrying about whether I’d ever earn a nickel at it. It was the most refreshing, exciting feeling,” Dan says, adding with a quick smile, “but then again, I was an accountant for almost forty years, so I’m easily excited.” With “an investment of absolute zero … just my level of risk tolerance,” Dan relied on word of mouth and a few flyers posted in businesses around the neighborhood to advertise his pet sitting and pet walking services. “To be honest with you, at first I felt a little silly doing it … like a sixty-year old kid starting a lemonade stand. I was thinking I might get a call or two out of it, but that would be about it.”

The Little Book That Builds Wealth: The Knockout Formula for Finding Great Investments
by Pat Dorsey
Published 1 Mar 2008

Selling a modestly undervalued stock to fund the purchase of a supercheap stock is a smart strategy. So is selling an overvalued stock and parking the proceeds in cash if there aren’t any attractively priced stocks at the time. 4. Selling a stock when it becomes a huge part of your portfolio can make sense, depending on your risk tolerance. Conclusion More than Numbers I LOVE THE STOCK MARKET. I don’t love all the raving and ranting about job reports and Federal Reserve meetings, nor the breathless discussions of quarterly earnings reports minutes after they hit the newswires. Most if this is just noise, anyway, and has little bearing on the long-term value of individual companies.

DeFi and the Future of Finance
by Campbell R. Harvey , Ashwin Ramachandran , Joey Santoro , Vitalik Buterin and Fred Ehrsam
Published 23 Aug 2021

Oracles are surely an open design question and challenge for DeFi to achieve utility beyond its own isolated chain. STABLECOINS A crucial shortcoming of many cryptocurrencies is excessive volatility. This adds friction to users who wish to take advantage of DeFi applications but don't have the risk-tolerance for a volatile asset like ETH. To solve this, an entire class of cryptocurrencies called stablecoins has emerged. Intended to maintain price parity with some target asset, USD, or gold, for instance, stablecoins provide the necessary consistency that investors seek to participate in many DeFi applications and allow a cryptocurrency native solution to exit positions in more volatile cryptoassets.

Finding Alphas: A Quantitative Approach to Building Trading Strategies
by Igor Tulchinsky
Published 30 Sep 2019

Each generation of algorithmic modelers has an opportunity set that includes the possibility of discovering powerful market forecasts that will generate significant profit. THE OPPORTUNITY Exploitable price patterns and tradable forecasting models exist because market participants differ in their investment objectives, their preferences (such as risk tolerance), and their ability to process information. Participants work with a finite set of resources and aim to optimize their investment strategies subject to the limits imposed by those resources. They leave to others the chance to take advantage of whatever trading opportunities they haven’t had the bandwidth or ability to focus on.

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Published 2020 by John Wiley & Sons, Ltd. 242 Finding Alphas who focus exclusively on particular sets of futures and currencies; the hedgers seek to control their exposure to the risks of particular factors. Commodity futures provide a good example, as producers and consumers of physical commodities use futures to hedge their risk on specific commodities. Each group of traders can have its own characteristic risk limits, tolerances, and trading behavior, which in turn can give rise to qualitatively different market behavior. For example, the farmers and food-producing corporations that use the agricultural markets to control their risks have little in common with the airlines that employ energy futures to hedge their future fuel costs.

Unknown Market Wizards: The Best Traders You've Never Heard Of
by Jack D. Schwager
Published 2 Nov 2020

It’s the same feeling I had as a kid going to garage sales. Every night I start the process, and I don’t know what I’m going to find. I enjoy doing my nightly analysis; that’s why I think I’m good at it. The things I do are so different from other traders. You would have a hard time finding someone who is more risk-tolerant than I am. I never use stop losses. Most traders will say, “Never add to a losing position.” If I am in a losing position and nothing has changed in the information dissemination, I will double down. I don’t care about price action. Other traders want a methodology that is systematic and regular; I am as far removed from systematic and regular as it is possible to be.

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If a meaningful stop point implies too much risk, it means that your position is too large. Reduce the position size so that you can place the stop at a price the market shouldn’t go to if your trade idea is correct, while still restricting the implied loss at that stop point to an amount within your risk tolerance on the trade. 11. You Don’t Have to Wait for a Stop to Be Hit A stop is intended to limit your approximate maximum loss on a trade to some predetermined amount. However, as Bargh advises, you don’t need to wait for a stop to be hit. The longer a trade has an open loss, the more seriously you should consider liquidation even though the stop point hasn’t been hit.

The Art of Scalability: Scalable Web Architecture, Processes, and Organizations for the Modern Enterprise
by Martin L. Abbott and Michael T. Fisher
Published 1 Dec 2009

The business rules very likely will include limiting changes during peak utilization of your platform or system. If you have the heaviest utilization between 10 AM and 2 PM C HANGE M ANAGEMENT and 7 PM and 9 PM, it probably doesn’t make sense to be making your largest and most disrupting changes during this timeframe. You might limit or eliminate altogether changes during this timeframe if your risk tolerance is low. The same might hold true for specific times of the year. Sometimes though, as in very high volume change environments, we simply don’t have the luxury of disallowing changes during certain portions of the day and we need to find ways to manage our change risks elsewhere. The Business Change Calendar Many businesses, from large to small, put the next three to six months and maybe even the next year’s worth of proposed changes into a shared calendar for internal viewing.

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We would argue that risk is cumulative to some degree, perhaps with an exponential decay but still additive. A risky event today can result in failures in the future, either because of direct correlation such as today’s change breaks something else in the future, or via indirect methods such as an increased risk tolerance by the organization leading to riskier behaviors in the future. Either way, actions can have near- and long-term consequences. Because risk management is important to scalability, we need to understand the components and steps of the risk management process. We’ll cover this in more detail M EASURING R ISK in this chapter but a high-level overview of the risk management process entails first and foremost as accurately as possible determining the risk of a particular action.

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If the development team has been working in a development environment with a single database and two days before the release the database is split into a master and read host, it’s pretty likely that the next release is going to have a problem unless there has been a ton of coordination and remediation work done. The second factor that should be considered in the overall risk analysis is the human factor. As people perform riskier and riskier activities, their level of risk tolerance goes up. This human conditioning can work for us very well when we need to become adapted to a new environment, but when it comes to controlling risk in a system, this can lead us astray. If a sabre-toothed tiger has moved into the neighborhood and you still have to leave your cave each day to hunt, the ability to adapt to the new risk in your life is critical to your survival.

Tools of Titans: The Tactics, Routines, and Habits of Billionaires, Icons, and World-Class Performers
by Timothy Ferriss
Published 6 Dec 2016

I subscribe to the Nassim Taleb “barbell” school of investment, which I implement as 90% in conservative asset classes like cash-like equivalents and the remaining 10% in speculative investments that can capitalize on positive “black swans.” Even if the above criteria are met, people overestimate their risk tolerance. Even if you have only $100 to invest, this is important to explore. In 2007, I had one wealth manager ask me, “What is your risk tolerance?” and I answered honestly: “I have no idea.” It threw him off. I then asked him for the average of his clients’ responses. He said, “Most answer that they would not panic up to about 20% down in one quarter.” My follow-up question was: “When do most actually panic and start selling low?”

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They’re attractive for many reasons: developing new business skills, developing a better business network, or—most often—taking what is effectively a 2-year vacation that looks good on a résumé. In 2001, and again in 2004, I wanted to do all three things. This short chapter will share my experience with MBA programs and how I created my own. My hope is that it will make you think about real-world experiments versus theoretical training, untested assumptions (especially about risk tolerance), and the good game of business as a whole. There is no need to spend $60K per year to apply the principles I’ll be discussing. Last caveat: Nothing here is intended to portray me as an investing expert, which I am not. Beginnings * * * Ah, Stanford Graduate School of Business (GSB).

Mastering Private Equity
by Zeisberger, Claudia,Prahl, Michael,White, Bowen , Michael Prahl and Bowen White
Published 15 Jun 2017

PE funds finance the full range of underlying real assets, from the development of greenfield projects to the improvement of existing facilities to the operation of mature assets. The maturity or stage of the development has of course a distinct impact on the risk−return profile of the underlying investment: a pre-completion project requires a higher risk tolerance but offers the greatest potential for price appreciation, while an investment in mature projects provides exposure to stable, long-term cash flows.5 Leverage is typically employed at all stages of development to enhance returns, with the physical assets themselves serving as collateral. Exhibit 5.4 provides a simple overview of the two project stages (early stage and mature) and the risk−return characteristics of real estate, infrastructure and natural resources projects.

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GPs may also define their niche by focusing on smaller, more complex deals, including restructuring activities or frontier market investing. Fundraising needs to be tailored to these strategies, for instance by targeting smaller investors such as high-net worth individuals and family offices, who have a higher risk tolerance and remain willing to invest in the original PE model. Where does this leave the industry? We expect several distinct segments to emerge: For lower risk (e.g., infrastructure or secondary buys from PE firms) and larger bilateral transactions, we expect to see more investors attempt to deploy capital directly, to save on the layer of fees and gain more control over their exposure.

Design of Business: Why Design Thinking Is the Next Competitive Advantage
by Roger L. Martin
Published 15 Feb 2009

A reliable system can generate tremendous time savings; once designed, it eliminates the need for subjective and thoughtful analysis by an expensive and time-pressed manager or professional. Hence the appeal of automated asset-allocation systems at investment advisory firms: before new clients even meet an adviser, the clients complete a questionnaire designed to reliably assess their investment horizons, risk tolerance, and investment goals. The data feeds into a program that impersonally graphs the recommended mix of stocks, bonds, and other investments. It takes the massively complex job of understanding individual investment needs out of the hands of the adviser. Where there was once an adviser consulting with clients at length and depth, and then tailoring a portfolio by applying a heuristic and subjective judgment, there is now an algorithm that quickly produces reliable answers.

How to Blow Up a Pipeline
by Andreas Malm
Published 4 Jan 2021

For Reznicek and Montoya, the prospect of 110 years in prison appeared to fall in the category – again related to faith – of sacrifice, although not of the kind that passively takes on unearned suffering. They risked the most draconian punishment in the act of resistance and were ready to pay the price. Should they be upbraided for the choice? Chenoweth and Stephan hold it against violent resistance that it mandates ‘high levels of both commitment and risk tolerance’, which are not for everyone. But seen from another angle, the consequent sacrifice is a signal to others that this is worth fighting for, even spending the rest of one’s life in prison for, and the climate crisis could do with some more acts of that calibre. So far, few have been prepared to risk more than a couple of nights under arrest.

The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse
by Mohamed A. El-Erian
Published 26 Jan 2016

Many, including the least creditworthy ones that could ill afford commercial borrowing terms, were tempted by the easy availability of debt financing as creditors rushed to provide financing at ever more lenient terms. With the private sector credit factories working at feverish levels of activity, the notion of proper creditworthiness analysis gave way to an emphasis on driving lending volumes ever higher. As such, a crazy culture of risk tolerance and spread convergence took hold. Even the worst-managed countries found themselves able to access large loans on terms (interest rate and maturity) that no longer diverged materially from those offered to the best-managed ones (Figure 1, illustrating the extent to which the spread on Greek bonds relative to German ones was compressed for many years).

Lean In: Women, Work, and the Will to Lead
by Sheryl Sandberg
Published 11 Mar 2013

Nicole Perlroth and Claire Cain Miller, “The $1.6 Billion Woman, Staying on Message,” New York Times, February 4, 2012, http://​www.​nytimes.​com/​2012/​02/​05/​business/​sheryl-​sandberg-​of-​facebook-​staying-​on-​message.​html?page​wanted=​all. 12. Dana R. Carney, Amy J. C. Cuddy, and Andy J. Yap, “Power Posing: Brief Nonverbal Displays Affect Neuroendocrine Levels and Risk Tolerance,” Psychological Science 21, no. 10 (2010): 1363–68. 13. Bianca Bosker, “Cisco Tech Chief Outlines the Advantages of Being a Woman in Tech,” The Huffington Post, October 27, 2011, http://​www.​huffington​post.​com/​2011/​10/​27/​cisco-​chief-​technology-​officer-​woman-​in-​tech_​n_​1035880.​html. 14.

Start With Why: How Great Leaders Inspire Everyone to Take Action
by Simon Sinek
Published 29 Oct 2009

According to the Law of Diffusion, mass-market success can only be achieved after you penetrate between 15 percent to 18 percent of the market. That’s because the early majority won’t try something new until someone else has tried it first. This is why we have to drop our price or offer value-added services. We’re attempting to reduce the risk tolerance of these practical-minded people until they feel comfortable to buy. That’s what a manipulation is. They may buy, but they won’t be loyal. Don’t forget, loyalty is when people are willing to suffer some inconvenience or pay a premium to do business with you. They may even turn down a better offer from someone else—something the late majority rarely does.

Architecting For Scale
by Lee Atchison
Published 25 Jul 2016

By creating this artificial mapping, they are able to load balance usage more effectively. Maintaining Location Diversity for Availability Reasons How do you ensure that AWS resources you launch have redundant components that are guaranteed to be located in different data centers and therefore risk tolerant to outages? There are a couple things you can do. First, make sure that you maintain redundant components in distinct AZs within a single account. If you have redundant components that are in multiple accounts, make sure you maintain redundancy in multiple AZs within each account individually.

The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness
by Morgan Housel
Published 7 Sep 2020

It’s just what works for us. We do it because cash is the oxygen of independence, and—more importantly—we never want to be forced to sell the stocks we own. We want the probability of facing a huge expense and needing to liquidate stocks to cover it to be as close to zero as possible. Perhaps we just have a lower risk tolerance than others. But everything I’ve learned about personal finance tells me that everyone—without exception—will eventually face a huge expense they did not expect—and they don’t plan for these expenses specifically because they did not expect them. The few people who know the details of our finances ask, “What are you saving for?

Investment: A History
by Norton Reamer and Jesse Downing
Published 19 Feb 2016

By the end of 2012, defined contribution plans held $5.1 trillion in assets.5 These plans, such as 401(k) plans, 403(b) plans, and 457 plans, are not managed by a single sponsor managing one fund. Instead, each employee controls his or her own account; the individual makes allocation decisions in accordance with his or her own risk tolerance and savings needs. This mitigates the risks associated with unfunded pension liabilities in many defined benefit plans, but it shifts the risk of investment loss and the management of the New Clients and New Investments 123 assets to the beneficiary. Very likely defined contribution plans will continue to be the employers’ retirement plan of choice because then employers are able to avoid the liabilities and risks associated with defined benefit plans.

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Asian sovereign wealth funds, by contrast, have foreign reserves due to positive trade balances as their source; thus their focus is more about diversifying away from the currency price risk to which they are exposed.33 The investment strategies of sovereign wealth funds also tend to align with the fundamental reasons for their creation. Most sovereign wealth funds tend to be slightly more interested in capital preservation, whereas ones that are centrally concerned with growing the assets often have a slightly higher risk tolerance. But in general, New Clients and New Investments 131 sovereign wealth funds are widely diversified and can manage a wide liquidity spectrum, since they do not have explicitly dated liabilities. Given the historical trend and the broadening of the conviction in the merits of these funds, the future seems bright for sovereign wealth funds.

Upheaval: Turning Points for Nations in Crisis
by Jared Diamond
Published 6 May 2019

Even Native Americans are descended from immigrants who arrived beginning at least by 13,000 years ago. To understand the fundamental benefits of an immigrant population, imagine that you could divide the population of any country into two groups: one consisting on the average of the youngest, healthiest, boldest, most risk-tolerant, most hard-working, ambitious, and innovative people; the other consisting of everybody else. Transplant the first group to another country, and leave the second group in their country of origin. That selective transplanting approximates the decision to emigrate and its successful accomplishment.

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That selective transplanting approximates the decision to emigrate and its successful accomplishment. Hence it comes as no surprise that more than one-third of American Nobel Prize winners are foreign-born, and over half are either immigrants themselves or else the children of immigrants. That’s because Nobel Prize–winning research demands those same qualities of boldness, risk tolerance, hard work, ambition, and innovativeness. Immigrants and their offspring also contribute disproportionately to American art, music, cuisine, and sports. Everything that I have described so far in this chapter can be boiled down to saying: the U.S. enjoys enormous advantages. But countries can squander their advantages, as has Argentina.

How Money Became Dangerous
by Christopher Varelas
Published 15 Oct 2019

It instilled a new Wild West culture at Salomon Brothers, ushering in an every-man-for-himself atmosphere, in which individual employees made colossal gambles for the possibility of lucrative payouts. The central reason for this massive shift in risk was that Salomon traders had essentially started playing with house money, the balance sheet of the public company, rather than using their own personal capital. Not using their own money led to higher risk tolerance and larger losses when things didn’t go right. Investment banks went public for multiple reasons. A primary reason was access to the capital needed to scale the business in response to customer demand for bigger financings and underwritings. Globalization and the creation of mega-international corporations demanded financial institutions that could underwrite larger and larger debt and equity issuances, as well as institutions that could support those issuances with trading and analysis on a level that a traditional partnership could not.

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The lawyers, bankers, and business development teams from each of the firms were there at the table, with people raising this and that issue. Every new point would have ripple effects on the closing terms, which kept compounding: working-capital adjustments, reps and warranties, who would be responsible for this or that happening. Each party had different personalities and levels of sophistication, different deal appetites and risk tolerances. Not to mention, the companies at the table were geographically and culturally diverse—from Japan, North Carolina, and upstate New York. Every time you asked the Japanese team a question, they said yes, even when the answer should absolutely have been no. For example, we’d ask, “Is it possible that Furukawa could do the entire deal?”

The Automatic Millionaire, Expanded and Updated: A Powerful One-Step Plan to Live and Finish Rich
by David Bach
Published 27 Dec 2016

If you use an online tool from any of these firms (large or small) to build your automatic portfolio, please take time to go through the questionnaires carefully. Don’t just fly through the questions and click away. Most of these firms determine the mix of investments based on what you tell them about your time horizon and your risk tolerance. If you click on one wrong button, your entire portfolio can be built incorrectly, with either too much risk or not enough. When in doubt, call the company and talk to one of their advisors. I want you to be safe, prepared, and knowledgable about the decisions you make on this. GOING TO A BROKERAGE FIRM OR BANK After looking at the company web sites I just described, you may want to do even more research.

Futureproof: 9 Rules for Humans in the Age of Automation
by Kevin Roose
Published 9 Mar 2021

And ultimately, if you did decide to invite the chimp army into your office, you wouldn’t do it right away. You might conduct a Chimp Safety Audit or convene a Chimp Oversight Task Force. You might decide to put a small number of chimps in a room under close supervision, train them to do a simple task, and evaluate the results before giving them more important assignments. But whatever your risk tolerance was, I’m fairly confident that you wouldn’t just invite the chimps in, give them badges and lanyards, and say “Okay, get to work!” And you sure as hell wouldn’t put them in charge. * * * — You probably see where I’m going with this. In the last chapter, we discussed what happens when humans are turned into endpoints—when a process can’t be fully automated yet, and people are called in to fill the gaps in the meantime.

Evidence-Based Technical Analysis: Applying the Scientific Method and Statistical Inference to Trading Signals
by David Aronson
Published 1 Nov 2006

In such a world, some investors would be more adverse to risk than others, and they would be willing to pay other investors to accept the burden of additional risk. Also, there would likely be risk-tolerant investors looking to profit from the opportunity to assume additional risk. All that would be needed in such a world is a mechanism by which risk can be transferred from the risk adverse to the risk tolerant and for compensation to be paid to those willing to accept said risk. Let’s step away from markets for a moment to consider one mechanism by which the risk adverse can compensate the risk inclined—the insurance premium.

Human + Machine: Reimagining Work in the Age of AI
by Paul R. Daugherty and H. James Wilson
Published 15 Jan 2018

Its more than twenty-eight hundred stylists log in at their own computers, which become a digital console of sorts, and then click around an interface that’s designed to help them make quick, relevant styling decisions. Options are automatically sorted so they waste no time searching through wrong-sized items. The interface also provides client information like risk tolerance and feedback history. Interestingly, the interface is designed to help stylists overcome biases; it can vary the information they see to test for and nudge them out of recommendation ruts.3 Even with constant monitoring and algorithms that guide decision making, according to internal surveys, Stitch Fix stylists are mostly satisfied with the work.

Alpha Trader
by Brent Donnelly
Published 11 May 2021

Distilling all the research down to one formula, I get this new equation: Trading success = rational thinking + IQ + self-control - overconfidence Recall from Chapter 3, the formula for general success (money, academic grades, and sports) was: Success = conscientiousness + IQ + talent/skill + luck - neuroticism Combining it all together, we get this final equation: Alpha Trader = rational + intelligent + skilled + conscientious + calibrated confidence Note my equation for trading success excludes some traits that are important but not critical to trading success. I did not include risk appetite, for example. People at each end of the risk-taking continuum (extremely risk averse or highly risk seeking) might underperform those in the middle, but risk appetite is not an important character trait in the literature on trading performance. Furthermore, risk tolerance can be dialed up or down fairly easily with a simple set of rules. I have seen traders at every point on the risk-taking spectrum succeed. Note that before the year 2000 or so, IQ was less important in trading because trading was more skill-based and less quantitative. Now, a higher level of intelligence is required although I would argue that Wall Street currently overvalues IQ and academics, and does not focus enough on grit, street smarts and fire in the belly.

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Gardner), 81, 492 risk allocation, 107, 362, 374 risk appetite, 72 assessing, 108—119 banks and, 151 effects influencing, 108, 172—173 moderate, 113—117 strong, 117—119, 186 systematic increases in versus winner’s tilt, 379 too much, 119, 186 varying, 355 See also risk-averse trader risk-averse trader, 109—113, 116—117, 186, 352 tips, 110—113 See also risk aversion risk aversion, 13, 14, 113 in Europe, 480 global, 481 periods, 262 regular versus crisis, 443 risk management, 191 automated system, 158, 482, 484 challenges, 349 daily, 367—368 importance of, 349 lack of focus on, 156, 167—168 process, 268 risk of ruin and, 361 rule creation, 106 See also risk management, individual trade; risk management, monthly; risk management, yearly; risk management system, developing risk management, individual trade, 369—385 abandoning plan, 385 conviction level and, 369—374 evolution of expected value over life of trade, 380-381 knowing default mode network (DMN), 382-384 moving stop loss and, 380 position sizing and, 376—379 rare attractive trade and, 369—370 sticking to plan, 381-382, 384 tiered system, 369 type of trade and, 369 risk management, monthly, 362—367 determining $ at risk for Type I, II, and III trades, 362 determining goals before month, 362 determining monthly stop loss, 362 See also variance risk management, yearly, 354—362 avoid blowing up, 358—359 family and, 358 path dependence, 356, 359—362 slow start and gradual P&L buildup, 354—358 understanding of metagame, 358 risk management system, developing, 353—354 capital of trader and, 354, 356, 368 leverage access of trader and, 354 liquidity of products traded and, 354 personality of trader and, 354 time horizon and, 354, 368 trading style and, 354, 368 risk of ruin, 167, 168, 191, 256 risk management and, 361 Risk Parity, 87 risk-seeker, 34 risk-taking continuum, 72 risk tolerance, 72 Robbins, Tony, 138, 461 Robinhood, 9, 24 Roosevelt, Theodore, 267 Roth, J., 140 round number bias, 214—216, 481 idea generation and, 406 NFLX, 216 TSLA, 215 round trip, 276 RSI. See relative strength indicator (RSI) run-up trade, 396—397 idea generation and, 396—397 lotto ticket trade and, 397 obvious trade and, 397 positioning and, 397 Russia Crisis (1998), 441 S&P 500, 222, 243, 263, 274, 341, 370, 472 futures, 316, 420 performance, 224, 262, 264, 284, 317, 318, 340 rally, 14, 480 since World War II, 264, 265 TSLA added to, 292, 294 safe haven, gold as, 262, 263 Saffo, Paul, 83—84 Saudi/Russia oil price war (2020), 441 Schneider, Frédéric, 68 Schwager, Jack, 491 Science of Self-Discipline, The (P Hollins), 106, 491 screen breaks, 194—195 seasonality, 246, 319, 402, 431 self-assessment.

Practical Doomsday: A User's Guide to the End of the World
by Michal Zalewski
Published 11 Jan 2022

If you approach a financial advisor and ask them what to do with your savings, their first question will be about your investment objective—expecting to hear that you want to retire early, send your children to a posh college, or make a lot of money on self-driving cars. But their first real question will be about your risk tolerance. If you’re risk-averse, they’ll keep your account mostly in cash or government bonds, but if you tell them you want to get rich quick, they’ll recommend putting a good chunk of your money into stocks that historically showed high volatility, with the implication that higher payoffs might result down the line.* For the purpose of safeguarding rainy-day funds, I believe this thinking is flawed; risk has many dimensions.

Mastering the VC Game: A Venture Capital Insider Reveals How to Get From Start-Up to IPO on Your Terms
by Jeffrey Bussgang
Published 31 Mar 2010

They are much more likely to start something that has a reasonably clear path to success and can generate income within a year or two (particularly rare for start-ups involving sophisticated technology with a long development cycle). Or they may tinker with their idea, hire an employee or two, and dribble in money as needed, working out of their basement or garage or in a corner of somebody else’s office. Entrepreneurs often also raise money from family and friends but, again, the amounts available and the risk tolerances are relatively low. Some large companies, especially technology companies like Microsoft, IBM, and Siemens, can also be seen as a type of VC, because they invest funds in what might be thought of as start-up technology ventures within their organizations. They extol the virtues of entrepreneurship, work to instill the spirit of individual enterprise within their employees, and would dearly love to create breakthrough products in their own research and development (R&D) labs—and sometimes do.

Selfish, Shallow, and Self-Absorbed: Sixteen Writers on the Decision Not to Have Kids
by Meghan Daum
Published 29 Mar 2015

She knew everything that I (and science) knew about prenatal drug abuse. But she scoffed when I reminded her. She also knew what Hugh Laurie’s character had said in nearly every episode of House: “Everybody lies.” And addicts lie the most. Some people are energized by risk. There’s no reason why they shouldn’t be. But in a relationship, the risk tolerance of partners should match. To draw upon the wisdom of Aesop, ants should not marry grasshoppers. I am an unglamorous ant—deferring gratification, socking away money religiously and investing it prudently. My partner was a grasshopper—seeking what she wants when she wants it, unconcerned by the threat of a rainy day.

Electronic and Algorithmic Trading Technology: The Complete Guide
by Kendall Kim
Published 31 May 2007

This consideration requires the use of properties of the distribution estimates, in addition to averages, such as standard deviation measures. 4. Price sensitivity As price sensitivity increases, structure becomes less useful, due to the need to advertise willingness to trade. Short-term volatility history and real-time deviation are inputs along the dimension. 5. Risk tolerance Refers to execution risks versus the benchmark. Greater tolerance generates less need for a structured horizon and schedule. Pre-trade information can map out optimal tradeoffs between risk, cost, and alpha for varying trade horizons.2 6.3 Algorithmic Feasibility Not all trade orders are suitable for an algorithmic strategy.

Eat People: And Other Unapologetic Rules for Game-Changing Entrepreneurs
by Andy Kessler
Published 1 Feb 2011

Fortunately, money sloshes around the globe seeking its highest return. To be a true Free Radical, be the highest return. Money goes wherever it damn pleases. Moving around the globe, pulsing through electronic networks and bank databases, seeking to maximize its risk-adjusted return. Maybe someone’s risk tolerance is low so they invest their money in U.S. Treasury Bills. So be it. Others (like me) think that teams of smart people inventing the future are actually less risky than big corporations that are or will soon be under attack from these entrepreneurs, so I invest in small companies and start-ups.

The Complete Guide to Property Investment: How to Survive & Thrive in the New World of Buy-To-Let
by Rob Dix
Published 18 Jan 2016

If you could make roughly the same net return from a couple of unencumbered properties or a globally diversified portfolio of stocks and bonds, the latter might give you better peace of mind. Restructure The options above are all totally valid strategies, but the best option of all is likely to be a mix-and-match of all of them, depending on your risk tolerance and income requirements. For example, you could: Sell a couple of properties to raise cash to put into stocks and bonds for diversification. Sell another to reduce your loan-to-value. Keep the rest for income, with very low mortgages so you’re not overly worried about changes to interest rates.

Built for Growth: How Builder Personality Shapes Your Business, Your Team, and Your Ability to Win
by Chris Kuenne and John Danner
Published 5 Jun 2017

For this book, we applied the same methodology to answer a question further upstream: who builds the businesses that sell those products and services in the first place, and why? Whom We Focused On Building a successful business and growing it to large scale is a marathon effort. We do not focus here on the general personality characteristics that might differentiate the runners of that race from the public at large—things like risk tolerance, comfort with ambiguity, ambition, a sense of independence, and personal initiative. You can read elsewhere about those traits that are shared by most entrepreneurs the world over, whether they are successful or not. We concentrate instead on the winners of the marathon—the successful men and women who have built businesses that have survived and grown.

Principles of Corporate Finance
by Richard A. Brealey , Stewart C. Myers and Franklin Allen
Published 15 Feb 2014

Thus the corporation’s financial manager faces two broad financial questions: First, what investments should the corporation make? Second, how should it pay for those investments? The investment decision involves spending money; the financing decision involves raising it. A large corporation may have hundreds of thousands of shareholders. These shareholders differ in many ways, such as their wealth, risk tolerance, and investment horizon. Yet we shall see that they usually share the same financial objective. They want the financial manager to increase the value of the corporation and its current stock price. Thus the secret of success in financial management is to increase value. That is easy to say, but not very helpful.

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There is no way that these shareholders can be actively involved in management; it would be like trying to run New York City by town meetings. Authority has to be delegated to professional managers. But how can Walmart’s managers make decisions that satisfy all the shareholders? No two shareholders are exactly the same. They differ in age, tastes, wealth, time horizon, risk tolerance, and investment strategy. Delegating the operation of the firm to professional managers can work only if the shareholders have a common objective. Fortunately there is a natural financial objective on which almost all shareholders agree: Maximize the current market value of shareholders’ investment in the firm.

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Maximizing shareholder wealth is a sensible goal when the shareholders have access to well-functioning financial markets.6 Financial markets allow them to share risks and transport savings across time. Financial markets give them the flexibility to manage their own savings and investment plans, leaving the corporation’s financial managers with only one task: to increase market value. A corporation’s roster of shareholders usually includes both risk-averse and risk-tolerant investors. You might expect the risk-averse to say, “Sure, maximize value, but don’t touch too many high-risk projects.” Instead, they say, “Risky projects are OK, provided that expected profits are more than enough to offset the risks. If this firm ends up too risky for my taste, I’ll adjust my investment portfolio to make it safer.”

Hedge Fund Market Wizards
by Jack D. Schwager
Published 24 Apr 2012

The larger the position, the greater the danger that trading decisions will be driven by fear rather than by judgment and experience. According to Clark, one way of knowing your position is too large is if you wake up thinking about it. You also need to be sure that your methodology is consistent with your risk tolerance. For example, if your trade implementation strategy allows for building a three-unit position, but your natural risk tolerance is only one unit, you can easily end up panicking out of good positions because you are trading larger than your comfort level. Trading size needs to be kept small enough so that fear does not become the prevailing instinct guiding your judgment.

The Handbook of Personal Wealth Management
by Reuvid, Jonathan.
Published 30 Oct 2011

Any assessment that falls short is fruitless, not to be mention potentially damaging to the attainment of the investor’s financial targets. The primary profiling considerations are summarized in Figure 1.1.2. ឣ 10 PORTFOLIO INVESTMENT _________________________________________________ Investors risk tolerances Tolerance to loss of capital Volatility (ability to withstand fluctuations in returns) Return objectives Return target over specified time frame Time horizon Time expectation for goal achievement Income The requirement for cash flow (coupons, dividends) Could be tied to liability management Liquidity requirements and illiquidity tolerance Tolerance to illiquidity Consideration to future portfolio evolution/cash needs Currency Base currency or basket of currencies reference Hedging requirements Taxation considerations/advice being taken Specific areas of awareness – universe restrictions Capital vs income return derivation Further preferences and constraints Specific/important/ancillary information Source: Citi Private Bank Figure 1.1.2 Profiling considerations A well-constructed portfolio plan is the end result of extensive profiling and holistic review.

Rigged Money: Beating Wall Street at Its Own Game
by Lee Munson
Published 6 Dec 2011

Let’s not even get into the world of commodities or complex strategies. If the industry can convince you only to think of the asset class’s expected return, you are then tuned into their prognostications of what those returns will be. The pie chart is just the delivery system, like a cigarette. Now, with your handy little allocation and risk tolerance given to you by a trusted adviser, you are free to roam the garbage dumps of Wall Street noise to find your golden goose. Will it be Eastern Europe that boosts your returns this year, or perhaps a bet on China? What would otherwise look like reckless abandon is now fully sanctioned by Wall Street.

Financial Market Meltdown: Everything You Need to Know to Understand and Survive the Global Credit Crisis
by Kevin Mellyn
Published 30 Sep 2009

History has not ended, it has been rewound to the 1970s and before, all the way back to the post-war socialist consensus that lonely voices like Ayn Rand railed against. YOU AND YOUR MONEY This brings us back to you and your money. The balance of risk and return in a market can be reasonably gauged when the rules are known. We can’t anticipate exactly what the market will do tomorrow, but we can hedge our bets and act on our own risk tolerance. We Conclusion can make our own decisions like grown-ups and take responsibility for the ones that go wrong. If something sounds too good to be true, it probably is, and those who are not skeptical of the claims of financial professionals can end up at the wrong end of a Ponzi scheme or an exploding interest-only mortgage.

Do More Faster: TechStars Lessons to Accelerate Your Startup
by Brad Feld and David Cohen
Published 18 Oct 2010

It is critical to decide up front how this cash will be treated. Is it debt? Is it convertible debt? Does it buy a different class of shares? What happens if the company raises follow-on funding? What will we pay ourselves? Who gets to change this in the future? This can be a touchy issue. Risk tolerance varies by individual and it is a good idea to factor this into determining the compensation plan for the founders. The issue can be clouded sometimes when one of the founders is investing significant cash into the enterprise. What are the financing plans for the company? Will the company be self-funded and bootstrapped?

Smart Money: How High-Stakes Financial Innovation Is Reshaping Our WorldÑFor the Better
by Andrew Palmer
Published 13 Apr 2015

He escaped by jumping a wall topped with razor wire—and still has the scars on his hand and leg to prove it. The aim was to scare him, not kill him. “They succeeded,” he says ruefully. Oldfield abandoned his Russian adventure and headed back to London. That first abrupt experience gave him a feel for his own levels of risk tolerance. It also educated him on how mortgage markets in general work. One feature of the housing-finance market in particular bothered him: home ownership requires both the borrowers and the lenders to take on an awful lot of risk. Borrowers must face up to the possibility of unemployment, negative equity, and rising interest rates; lenders must cope with the threat of defaulting borrowers and declining asset values.

How to Avoid a Climate Disaster: The Solutions We Have and the Breakthroughs We Need
by Bill Gates
Published 16 Feb 2021

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z A adaptation to warmer climates, 160 by climate-proofing cities and infrastructure, 170 drinking water and, 173 for farmers in low-income countries, 29, 35, 165 funding needs for, 169, 174, 229 Africa emissions in, 162, 165, 170 energy use in, 4, 6, 67, 68, 73 farming in, 29, 118, 121, 123, 161, 163, 165 fighting poverty and climate change in, 4, 6, 67, 68, 160 forests in, 127, 172 health care in, 4, 148, 164 agriculture, see farming air conditioning (A/C) units, 148 and n, 150, 152, 154, 244 and n see also heating and cooling airplanes and fuel alternatives, 134, 135, 143 and n, 147 air pollution, 48, 179 animals as food, 112, 115, 116, 117, 126, 162 artificial meat, 119, 222 B batteries for storing electricity with renewables, 75, 79 and n, 91, 93 in vehicles, 135, 137, 140, 141, 142 Bill & Melinda Gates Foundation, projects of for adaptation of farming in poor countries, 35, 168 for fighting COVID-19, 12 on global health, 4, 62, 148, 164 biofuels, advanced for home heating, 155, 56 plant sources for, 116, 138 research needs for, 139, 147, 192 uncertainties about, 191 for vehicles, 59, 138, 39, 140, 142, 143, 144, 147, 191, 207 Breakthrough Energy Ventures, 11, 54, 55, 82n, 84 breakthrough technologies, see innovations needed buildings, green, 111, 157, 58, 214, 221 see also heating and cooling buses, 134, 140, 41, 147, 214 C CAFE (Corporate Average Fuel Economy), 48, 49 cap-and-trade systems, 186, 206 carbon border adjustments, 215 carbon capture, 127 direct air capture (DAC), 15, 63, 95, 109, 111, 207 from point sources, 94, 107, 108, 109, 111, 207 use of, for production of low-carbon fuel, 110, 135, 137 carbon dioxide, 22, 95, 126 in making materials, 103, 104, 105, 110 price increase for externalities of, 186, 194, 206, 210, 212, 215, 223 from steel and cement production, 103, 107, 109 in trees and forests, 127 see also greenhouse gas emissions carbon dioxide equivalents, 22, 41 carbon, price on, 186, 194, 206, 210, 212, 215, 223 cars alternative fuels for, 137, 40 electric (EV), 135, 146, 147, 221, 242n emissions from, 54, 55, 134 fuel efficiency for, 46, 48, 145 slow adoption of new types of, 44, 46, 137, 146 cattle, see cows, raising cement, production of, 100, 104, 107, 108, 109, 187 CGIAR agricultural research, 166, 68 Chevrolet Bolt EV, 136, 242n China, 30 development in, 72, 73, 100, 103, 115, 16, 150 emissions in, 133, 41 green projects in, 90, 140, 41, 172, 181, 182, 190, 192 city councils, role of, 214 clean electricity, standards for, 207, 210, 212, 213 see also electricity, zero-carbon climate change conversations about, 52 COVID-19 and, 3n, 12, 33 and n, 64, 132, 133, 198, 227 moving to consensus on, 14, 49, 195, 225 timeframe for action on, 35, 196, 209, 212, 213 weather patterns and, 24 see also greenhouse gas emissions climate disaster, avoiding, 8, 16 with adaptation to warmer climates, 35, 160 barriers to, 37 electricity and, 66 government policies as necessary for, 179 growing plants and animals and, 112 heating and cooling and, 148 with individual action, 218 making materials and, 98 plan for, 195, 227 rationale for, 18 tips for conversations on, 52 transportation and, 130 see also specific entry for each topic, e.g. electricity, zero-carbon clouds, brightening of, 177 coal, 44, 87 global electricity from, 71, 70 power plants with, 73, 85, 95 replacement of jobs in, 188 companies, role of, 16, 202, 222 computer models, predictions with, 20, 24, 82, 171 concrete, 98, 100, 104, 187 cooling, 148 see also heating and cooling COP 21, 10, 215 see also Paris Agreement coral reefs, 30, 172 corn (maize), 29, 162, 166 corn ethanol, 138, 191, 192 COVID-19, impact of, 3n, 12, 33 and n, 64, 132, 33, 198, 227 cows, raising, 112, 115, 117, 126, 162 D dams for hydropower, 7n, 58, 69 and n, 70, 85 deforestation, 113, 126, 172 developing countries and emissions, 40, 43, 72, 73, 101, 102, 115, 116, 133, 150, 151, 163 developing green products companies and investors for, 189, 191, 204, 223 with consumer access and demand, 186, 203, 220 with early adopters, 202, 203, 224, 225 with government purchasing, 203, 208, 210, 213, 214 infrastructure for, 189, 204, 209, 210 scaling phase for, 205, 210, 213 standards for, 208, 211 up-to-date policies for, 48, 90, 157, 187, 190, 205 diesel fuel, 144, 142 divestment from fossil fuel companies, 9 droughts, 27, 33, 166, 167 E ecosystems, protection of, 172, 73 18-wheelers, 134, 140, 141 electric heat pumps, 60, 153, 154, 156, 221, 244n electricity, 68 capacity vs. generation in production of, 79 distribution of, 75 and n, 83 global sources of, 70, 239n measurements of, 56, 57 overgeneration and undergeneration of, 77 reliability and availability of, 47, 66, 75 transmission of, 74 and n, 80 electricity, zero-carbon (green), 66 with carbon capture, 94 demand shifting and reduction for, 95 emissions to be reduced by, 8, 55, 66, 67, 151 future growth in need of, 79, 83, 109, 146 geothermal as, 90 government policies for, 146, 182, 207, 211, 212, 213, 214 Green Premiums for, 72, 79, 81, 83, 106, 194, 221 green pricing programs for, 221 innovations in, 84, 90, 96, 190 intermittency problem with, 8, 57, 75, 77n, 81, 93 demand shifting and reduction for, 84 offshore wind for, 89 solar energy for (see solar energy) solutions available for, 72, 81, 89, 95, 192, 202, 205 storage options with, 75, 79 and n, 91 wind energy for (see wind energy) electric vehicles (EVs) batteries for, 135, 137, 140, 141, 142 cars, 135, 146, 147, 221, 242n charging stations for, 142, 146, 205, 209, 214 city buses, 140, 41, 147, 214 scaling of, 205 electrification, 182 for cooling and heating, 60, 149 and n, 150, 156, 221, 244n as goal, 109, 197 for manufacturing, 106, 109, 111 for transportation (see electric vehicles; electrofuels) electrofuels for home heating, 155, 56 research needed on, 147 for vehicles, 139, 40, 142, 143, 144, 147, 207 see also hydrogen emissions, see greenhouse gas emissions energy efficiency, 145, 151, 157, 182 energy policies in U.S., 48, 179, 191, 207 energy use and income, 4, 6 ethanol, corn, 138, 191, 192 Europe/European Union, 29, 216 diet in, 115, 116, 118, 121 emissions in, 41 green initiatives in, 73, 78, 84, 89, 136, 192, 207, 208 external costs of carbon, 186, 194, 206, 210, 212, 215, 223 F farming climate change/chaotic weather and, 29, 31, 35, 165 cropland and, 116, 127, 138 crop yields in, 29, 114, 122, 123, 165 fertilizer for, 115, 121 initiatives in poor countries, 35, 118, 121, 23, 161, 163, 165 with zero-carbon goal (see growing plants and animals) federal government, role of, 183, 188, 190, 203, 210, 214 feed-in tariffs, 192, 194 fertilizer, synthetic, 115, 121 flooding, 167, 168, 171, 172, 73 flow batteries, 92 food production, see farming; growing plants and animals forests and trees, 113, 126, 172, 73 fossil fuels cost of, 39, 45, 58, 70, 74, 105, 132, 186, 206 damage caused by, 40, 74, 186 divestment from, 9 for furnaces, 60, 153, 56, 186, 221, 244n history of use of, 18, 24, 43, 44, 69, 132, 206 in manufacturing, 106 pervasiveness of, 37, 69 power density of, 58 replacement of jobs and tax base from, 146, 187 retirement of products using, 208 for transportation, 132 see also fuels, clean; gasoline fuel cell batteries, 93 fuel efficiency, 46, 48, 145 fuels, clean drop-in fuels, 138, 139 for heating, 155, 56 need for, 147, 153, 189 standards for, 207, 211, 212 for transportation, 137, 40, 142, 143, 44, 147, 191, 207 furnaces, home, 60, 153, 56, 186, 221, 244n G gas, natural, see natural gas gasoline alternatives to, 137, 40, 144, 146, 191, 192, 242n, 243n electric alternatives for, 135, 140, 41, 146, 242n as energy dense and cheap, 130 taxes on, 145, 146 Gates, Bill, Sr., 112 Gates, Melinda, 4, 8, 12, 62, 117 Gates Foundation projects, see Bill & Melinda Gates Foundation geoengineering, 176 geothermal power, 67, 85, 90 Germany, 78, 153, 192 global temperature increase, 20 and cascading effects of climate change and climate disasters, 24 history and future of, 21, 24, 25 human activity as cause of, 7, 18, 21, 24, 238n impact of small degree of, 20, 24, 30 regional variations in, 21 government policies, role of, 179, 203, 230 in accounting for carbon costs, 186, 194, 206, 210, 212, 215, 223 for bringing technology to market, 108, 181, 189, 198, 202, 223 for buying green products, 146, 203, 208, 210, 213, 214 for infrastructure, 146, 170, 189, 204, 209, 210 in a just energy transition, 187, 229 at national, state, and local levels, 183, 188, 203, 208 need to update, 48, 90, 157, 187, 190, 205 for R&D funding, 184, 199 (see also R&D funding for innovations) for scaling new products, 205, 210, 213 see also adaptation to warmer climates Great Smog of London, 179, 80 greenhouse gas emissions, 22 capturing, 63, 94, 107, 108, 109, 111 carbon prices as a way to reduce, 186, 194, 206, 210, 212, 215, 223 causes of, 22, 24, 54, 55n cost for reduction of, 58 (see also Green Premiums) COVID-19’s effect on, 3n, 13, 64, 132, 33 and economic development, 40, 43, 72, 73, 101, 102, 115, 116, 133, 150, 151, 163 global temperature increase from, 7, 18, 21, 24, 238n growth and persistence of, 18, 19, 24, 41, 49 heat-trapping effect of, 18, 22 measuring, 53, 55n reduction of (see climate disaster, avoiding; zero, getting to) in rich vs. developing and poor countries, 40, 43, 162 see also carbon dioxide; methane; nitrous oxide Green Premiums, 58, 59n affordability of, 60, 61, 64, 158, 188, 214 calculation of, 59, 59n for cooling and heating, 151, 153, 154, 156, 157, 244n for electricity, 72, 79, 81, 83, 106, 194, 221 for food production, 119, 120, 125 for manufacturing, 106, 107 reduction/elimination of, 186, 204, 206, 209, 216, 223 for transportation, 136, 137, 139, 140, 142, 143, 144, 146, 242n Green Revolution, 114, 122, 166 grid-scale electricity storage, 92 growing plants and animals, zero-carbon goal for, 112 deforestation and trees and, 113, 126, 172 emissions to be reduced in, 55, 112, 117, 121, 124, 126, 162 with fertilizer, 115, 121 with food need increase, 113, 122, 23, 129, 165 Green Premiums for, 119, 120, 125 innovations for, 118, 125, 127, 165 solutions available for, 118, 165 H heating and cooling, zero-carbon goal for, 148 with A/C units, 148 and n, 150, 152, 154, 244n emissions to be reduced in, 55, 151, 152, 153, 157 with furnaces and water heaters, 60, 153, 56, 186, 221, 244n government policies needed for, 151, 155, 172, 186 Green Premiums for, 151, 153, 154, 156, 157, 244n innovations and, 152, 155, 56, 157 solutions available for, 151, 153, 54, 155, 156, 221, 244n heat pumps, 60, 153, 154, 156, 221, 244n home emissions, reducing, 187, 221 see also heating and cooling hydrogen, 88, 93, 105, 139 hydropower, 7n, 58, 69 and n, 70, 85 I India, 68, 73, 103, 114, 150, 167 Indonesia, 127, 150 infrastructure, building of, 170, 189, 204, 209, 210 innovations needed, technological for adaptation to warmer climates, 174, 176 carbon capture as, 63, 94, 107, 108, 109, 111, 207 for cooling and heating, 152, 155, 56, 157 as economic opportunity, 35, 61, 185, 216 for electricity production, 84, 90, 96, 190 (see also electrification; electrofuels) government policy and markets for, 108, 181, 189, 198, 202, 223 for growing food and forests, 118, 125, 127, 165 for manufacturing, 102, 108, 111 priorities for, 61, 189, 199, 200 for transportation, 137, 40, 141, 44, 146 see also R&D funding for innovations Intergovernmental Panel on Climate Change (IPCC), 7, 24, 28, 29 intermittency of renewable energy, 8, 57, 75, 77n, 81, 93 international cooperation, 152, 201, 214, 227 see also Paris Agreement ITER nuclear fusion facility, 89 J Japan, 78 and n, 86, 103, 150, 192, 216 jet fuel, 144, 143 jobs, transition to new, 187, 229 K Kenya, 163, 161 kilowatts, 56, 57, 73 L life cycle of products, 69n, 137, 154, 208 lightbulbs, replacing, 221 liquid metals for batteries, 92 lithium-ion batteries, 92 local government, role of, 183, 188, 203, 209, 213, 219 Low Carbon Fuel Standard, 207 low-income countries climate disasters in, 29, 163 energy use and emissions in, 4, 6, 162, 165, 170, 215, 237n farming in, 35, 118, 121, 23, 161, 163, 165 fighting both poverty and climate change in, 4, 6, 7, 9, 67, 68, 133, 160, 169, 175 forests in, 126, 127, 172 health in, 4, 62, 148, 164 M maize, drought-tolerant, 166 mangrove trees, 173 manufacturing cars, 135n, 145 with concrete and cement, 98, 100, 104, 107, 108, 109, 187 emissions to be reduced in, 54, 55 and n, 102, 103, 106, 7, 109 Green Premiums for, 106, 107 innovations for, 102, 108, 111 outsourcing of, 41 with plastics, 100, 104, 107, 110 product standards for, 208 recycling and reusing in, 110 with steel, 100, 102, 107, 108, 109 zero-carbon goal for, 98 meat and alternatives, 112, 115, 16, 117, 126, 129, 222, 241n methane short-term impact of, 21, 35, 176 sources of, 19, 21, 69, 113, 117, 118, 121 Mexico, 115, 116, 150, 166, 172 Miami, FL middle-income countries, 35, 64, 65, 133, 169, 199, 209, 216 Mission Innovation, 11, 12 N natural defenses, preservation and restoration of, 73 natural fertilizer, 123 natural gas for cooling and heating, 149n, 154, 155, 156, 244n global electricity from, 71, 70 history of use and cost of, 44 and job replacements, 188 and methane, 19, 21 net-negative emissions, 19, 110 net-zero emissions goal see also zero, getting to Nigeria, 4, 5, 127 nitrogen, 123, 125 nitrous oxide, 21, 113, 117, 124 nuclear energy advanced reactors, 8, 86, 89, 190 advantages of, 57, 84, 85, 86, 190 global electricity from, 84, 70 government policies on, 190 innovations in, 8, 86, 93, 190 for manufacturing, 107 power density of, 58 risks and safety of, 47, 86, 87, 190 for ships, 147 nuclear fission, 84 nuclear fusion, 87 O offshore wind energy, 89, 194 oil, 39, 43, 44, 70, 71, 87, 156, 191, 192 onshore wind energy, 194, 205 outsourcing of manufacturing, 41 oxygen, 30, 103, 104, 105, 110 P palm oil and deforestation, 127 pandemic, impact of, see COVID-19, impact of Paris Agreement, 10, 11, 12, 50, 212, 213, 215, 237n permafrost, melting of, 35 plant-based burgers, 119, 222 plastics, 100, 104, 107, 110 policies, see government policies power grids, decarbonized, 80, 82n, 97, 111, 151, 156 power lines, 81, 83 power plants, 57, 66, 67, 73, 80, 85, 87, 95, 190, 197, 208 private-public partnerships, 174, 184, 193, 194, 202, 211, 223 Puerto Rico, 27 pumped hydro and alternatives, 92 R R&D funding for innovations with industry partnerships, 174, 184, 193, 194, 202, 211, 222 with long-term commitment, 11, 48, 174, 184, 201, 204, 212 need for steep increases in, 189, 200, 212 priorities for, 61, 189, 199, 200 with risk tolerance, 11, 47, 175, 184, 201, 204, 212, 222 in U.S., 200, 210, 216 radioactive fuel and waste, 87, 88 reducing and reusing as lifestyle, 95, 110, 121, 145 refrigerants, 152 renewable energy batteries for, 75, 79 and n, 91, 93 government policies for, 90, 192, 207 intermittent generation of, 8, 57, 75, 77n, 81, 93 location and transmission with, 74 and n, 77, 80, 94 potential and limitations with, intro.1 and n, 8, 70, 74, 81, 224, 239n timing of transition to, 44, 45, 83, 238n in U.S., 7n, 73, 77n, 84, 89, 192, 193, 207 see also specific renewable sources Renewable Fuel Standard, 191, 207 renewable portfolio standards, 207 research and development, see innovations needed; R&D funding for innovations rice, new types of, 167, 168 Russia, 190 S sea level rise, 28, 160, 171 Seattle, WA, 26, 77, 157, 58 Shanghai, growth of, 101, 102 Shenzhen, China, 140, 41 ships and fuel alternatives, 132, 134, 143, 44, 147, 243n smallholder farms, 161, 163, 166 soil, nitrogen and carbon in, 124, 125 solar energy costs of, 81, 192 initiatives with, 174, 192, 202 intermittent generation of, 57, 75, 81, 86, 93 material use in panels for, 85, 240n power density of, 58, 86, 96 scaling of, 205 solar panels, 46, 80, 85, 157, 192, 240n state government, role of, 183, 203, 209, 212 steel, 100, 102, 107, 108, 109 storage of electricity, 91 see also batteries storms, 26, 27 sub-Saharan Africa, 4, 6, 29, 67, 68, 121, 163, 166 synthetic fertilizer, 115, 121 T temperature, see global temperature increase TerraPower nuclear reactor, 8, 86, 93, 190 thermal storage, 93 “This Is Water” speech (Wallace), 37, 38 and n transmission of electricity, regional, 74 and n, 80 transportation, zero-carbon goal for, 130 with electric alternatives (see electric vehicles) emissions to be reduced in, 54, 55, 131, 132, 33, 134, 135 and n with fuel alternatives, 137, 40, 142, 143, 44, 147, 191, 207 with fuel efficiency, 46, 48, 145 future demand for, 132, 33 Green Premiums for, 136, 137, 139, 140, 142, 143, 144, 146, 242n innovations for, 137, 40, 141, 44, 146 solutions available for, 135, 140, 41, 145, 205, 207 TransWest Express, 82 trees for carbon capture, 127 trucks and fuel alternatives, 134, 140, 141, 42, 146, 147 2050, getting to zero by, 35, 80, 137, 196, 209, 213, 230 U underground power lines, 83 United Kingdom, 90, 91, 179 United States electricity in, 69, 72, 80, 90, 182, 207 emissions in, 41, 132, 152, 163 energy policies in, 48, 179, 191, 207 government role in energy innovation, 210 R&D funding in, 200, 210, 216 renewables in, 7n, 73, 77n, 84, 89, 192, 193, 207 U.S.

Measure What Matters: How Google, Bono, and the Gates Foundation Rock the World With OKRs
by John Doerr
Published 23 Apr 2018

Stretch your team too fast and too far, and it may snap. In pursuing high-effort, high-risk goals, employee commitment is essential. Leaders must convey two things: the importance of the outcome, and the belief that it’s attainable. Few entities have Google’s resources to fall back upon when a moonshot crashes. Organizations have a range of risk tolerance, which may change over time. The greater the margin for error, the more a company can extend itself. For example, a 40 percent OKR failure rate might seem too risky—and too discouraging, no matter what leadership says. For high achievers, anything shy of perfection can sap morale. At Risk Management Solutions in California, there are “more degrees than employees,” says Amelia Merrill, a former HR leader.

Forge Your Future with Open Source
by VM (Vicky) Brasseur

While you could just whip up a project and throw it out on a code forge somewhere, you’ll get a lot better results if you pay attention to the small but important details that make a project worth using and worth contributing to in the first place. This chapter assumes you want to release a personal project. Releasing a project for work may share a lot of the same steps, but it’s a different matter entirely and is covered in the next chapter. Company-released projects often differ in scope, but they always differ in risk tolerance, intellectual property considerations, and strategic reasons for releasing the project. These characteristics make a very large difference in how you approach releasing a FOSS project, and messing them up can result in enormous costs. Which is to say: This chapter is for your own personal use.

Genentech: The Beginnings of Biotech
by Sally Smith Hughes

Arriving in 1970, Swanson encountered a thriving center of the microelectronics and computer industries in a region thirty miles south of San Francisco, soon to become known as Silicon Valley. It was without doubt the most entrepreneurial region in the world, boasting a refreshingly boundless, risk-tolerant, success-breeds-success culture in which an aspiring young person could spread his wings and try new things.7 Swanson had found his milieu. Inevitably, not every Citicorp investment went well. It became Swanson’s task to try to salvage the bank’s stake in a company rapidly going downhill. Serving on the board of the failing company, he met Eugene Kleiner, who with Thomas Perkins in 1972 had founded Kleiner & Perkins, a venture capital partnership with offices in San Francisco.8 Taking a measure of Swanson, Kleiner was impressed, according to Perkins, with the young man’s ability “to think straight and get things done.”9 When Swanson decided to leave Citibank and seek a new position, Kleiner recommended him to Perkins to fill a vacancy at the partnership.

Crisis Economics: A Crash Course in the Future of Finance
by Nouriel Roubini and Stephen Mihm
Published 10 May 2010

These CDOs of CDOs (sometimes called a CDO2) paled next to the more baroque products coming out of the labs on Wall Street: CDOs of CDOs of CDOs, better known as CDO3; and synthetic CDOs, which assembled a bunch of credit default swaps to mimic an underlying CDO. Some of these more esoteric products had far more than three tranches: they might have fifty or even one hundred, each of which represented a certain level of risk tolerance. In hindsight, the peril of this kind of financial innovation is easy to understand. Slicing and dicing credit risk and transferring it around the world suffused the system with financial instruments that were exotic, complex, and illiquid. These creations became so fiendishly complex and unique that it became difficult to value them by conventional means.

Top Dog: The Science of Winning and Losing
by Po Bronson and Ashley Merryman
Published 19 Feb 2013

Mitchell, “Serum Testosterone Levels in Surgeons during Major Head and Neck Cancer Surgery: A Suppositional Study,” British Journal of Oral & Maxillofacial Surgery, vol. 49(3), pp. 190–193 (2011) Carney, Dana R., Amy J. C. Cudy, & Andy J. Yap, “Power Posing: Brief Nonverbal Displays Affect Neuroendocrine Levels and Risk Tolerance,” Psychological Science, vol. 21(10), pp. 1363–1368 (2010) Carré, Justin M., Jenna D. Gilchrist, Mark D. Morrissey, & Cheryl M. McCormick, “Motivational and Situational Factors and the Relationship between Testosterone Dynamics and Human Aggression during Competition,” Biological Psychology, vol. 84(2), pp. 346–353 (2010) Carré, Justin M., & Pranjal J.

The Glass Half-Empty: Debunking the Myth of Progress in the Twenty-First Century
by Rodrigo Aguilera
Published 10 Mar 2020

It is evident that the optimism bias also serves as a coping mechanism for life: If we can’t dream of success, why bother pursuing it? Imagine, for example, if we took to heart the statistic that half of all businesses fail in their first five years.18 Perhaps entrepreneurship would be limited to exceedingly risk-tolerant individuals, or those with deep enough pockets that they can bear the financial costs of bankruptcy from the start. Everyone who starts a business has to deceive themselves that they will be among the surviving half. Imagine also living with the constant psychological burden of knowing the increasing odds of every disease that could kill us as we get older.

Building Secure and Reliable Systems: Best Practices for Designing, Implementing, and Maintaining Systems
by Heather Adkins , Betsy Beyer , Paul Blankinship , Ana Oprea , Piotr Lewandowski and Adam Stubblefield
Published 29 Mar 2020

With that command, you might raise ComponentState[MASVN] on components that receive an update late in the deployment pipeline, after qualifying the release on enough devices that you have high confidence that it will work as planned. An API like this may be useful when you’re responding to an active compromise or a particularly severe vulnerability, where velocity is critical and risk tolerance is higher than normal for availability issues. So far, this example has avoided introducing a dedicated API to mutate ComponentState. ComponentState is a delicate collection of values that impacts your ability to recover systems through updates or rollbacks. It is component-local, and external to the configured intent that a centralized piece of automation directly controls.

…

They can inject this knowledge into their team’s development process later on. Engaging with a Red Team helps you better understand your organization’s security posture and develop a roadmap for implementing meaningful risk reduction projects. By understanding the implications of your current risk tolerance, you can determine whether you need to make adjustments. External Researchers Another way to examine and improve your security posture is to work closely with outside researchers and enthusiasts who find vulnerabilities in your systems. As we mentioned in Chapter 2, this can be a useful way to get feedback about your systems.

When Free Markets Fail: Saving the Market When It Can't Save Itself (Wiley Corporate F&A)
by Scott McCleskey
Published 10 Mar 2011

One of the lessons of the financial crisis is that avoiding this tipping point is crucially important. This is how a firm can find itself falling from the top of the heap to the bottom of the pile with dizzying speed. Still, in many cases the problem corrects itself eventually when an investor with a higher risk tolerance sees the value of the collateral as undervalued, or the higher interest rates extorted from the failing firm as a good investment. The market creates a floor at which point investors come in, and the market stabilizes. Of course, if all else fails, the government could step in and play this supporting role—in other words, give a bailout.

Buying Time: The Delayed Crisis of Democratic Capitalism
by Wolfgang Streeck
Published 1 Jan 2013

In the psychologistic worldview of labour economics, the distinction between residual capital income and contractually fixed labour income – between profits and wages – is associated with different ‘risk propensities’: ‘risk-averse’ individuals prefer to be workers, with a low but secure labour income, while the more ‘risk-tolerant’ become entrepreneurs, with a less secure but potentially high capital income. Whereas recipients of residual income seek the highest possible yield on their capital investment, earners of fixed income try to keep as low as possible the input required of them.41 Distribution conflicts arise from the fact that, other things being equal, higher residual income for the profit-dependent entails lower wages for the wage-dependent, and vice versa.42 For a theory of political economy in which capital is an actor and not just machinery, the seemingly technical ‘functioning’ of the ‘economy’ – above all, growth and full employment – is in reality a political matter.

Exponential Organizations: Why New Organizations Are Ten Times Better, Faster, and Cheaper Than Yours (And What to Do About It)
by Salim Ismail and Yuri van Geest
Published 17 Oct 2014

So the person handling legal for a product has two reporting lines, one to the head of product, who has revenue accountability, and the other to the head of legal, whose job it is to ensure consistency across numerous products. This is great for command and control, but it’s terrible for accountability, speed and risk tolerance. Every time you try to do something, you have to get authorization from all the muckety-mucks in HR, legal, accounting and so on, which takes time. Another major issue Salim has observed with matrix structures is that, over time, power accrues to the horizontals. Often, HR or legal have no incentive to say yes, so their default answer becomes no (which is why HR is often referred to as “inhuman resources”).

The Charisma Myth: How Anyone Can Master the Art and Science of Personal Magnetism
by Olivia Fox Cabane
Published 1 Mar 2012

Baccus, and Michelle Palmer, “Self-Criticism and Self-Warmth: An Imagery Study Exploring Their Relation to Depression,” Journal of Cognitive Psychotherapy 20, no. 2 (2006): 183–200. 12. D. R. Carney, A. J. C. Cuddy, and A. J. Yap, “Power Posing: Brief Nonverbal Displays Affect Neuroendocrine Levels and Risk Tolerance,” Psychological Science OnlineFirst, September 21, 2010, http://www.people.hbs.edu/acuddy/in%20press,%20carney,%20cuddy,%20&%20yap,%20psych%20science.pdf. 13. R. F. Baumeister, “Ego Depletion and Self-Regulation Failure: A Resource Model of Self-Control,” Alcoholism: Clinical and Experimental Research 27, no. 2 (2003): 281–84. 14.

This Book Could Fix Your Life: The Science of Self Help
by New Scientist and Helen Thomson
Published 7 Jan 2021

, Frontiers in Psychology 10, 1145. 5. Lammers, J. et al. (2013), ‘Power Gets the Job: Priming Power Improves Interview Outcomes’, Journal of Experimental Social Psychology 49, 4, 776–9. 6. Carney, D. R. et al. (2010), ‘Power Posing: Brief Nonverbal Displays Affect Neuroendocrine Levels and Risk Tolerance’, Psychological Science 21, 10, 1363–8. 7. Simmons, J. P. and Simonsohn, U. (2017), ‘Power Posing: P-curving the Evidence’, Psychological Science 28, 5, 687–93. 8. Cuddy, A. J. C. et al. (2017), ‘P-curving a More Comprehensive Body of Research on Postural Feedback Reveals Clear Evidential Value for Power-Posing Effects: Reply to Simmons and Simonsohn’, Psychological Science 29, 4, 656–66. 9.

Heads I Win, Tails I Win
by Spencer Jakab
Published 21 Jun 2016

Though she’s still retained a lot of her frugal habits, she doesn’t need to. If she had gone with her emotions rather than my advice, the situation might be a lot different. I’m not telling you this to portray myself as some sort of hero or genius. I’m doing it to make a point. Because she trusted me, because her finances and risk tolerance were completely transparent to me, and because I was able to look at her situation rationally rather than emotionally, my mom’s finances potentially were saved from a ruinous outcome. A lot of the stocks she owned lost 90 percent, and in some cases 100 percent, of their value in the next two years.

Nerds on Wall Street: Math, Machines and Wired Markets
by David J. Leinweber
Published 31 Dec 2008

We may then select optimal strategies either by minimizing a quadratic utility function, or minimizing Value at Risk . . . , that explicitly considers the tradeoff between volatility risk and liquidation costs. Figure 3.2 is worth many words in understanding this trading model, and the intuitively appealing implications of its results for traders of different risk tolerances. Trader A is realistically risk-averse, accelerating to reduce risk at the cost of higher impact. Trader B is patient and risk-neutral, executing only to reduce expected costs. Trader C is an unrealistic trader who likes risk and who slows down the execution to get more risk, also incurring more impact cost.

Planet Ponzi
by Mitch Feierstein
Published 2 Feb 2012

But that doesn’t mean that the scheme is dead and finished with. It just means that the public sector chose to swallow the private sector’s debts. The debts are still there. The bad assets are still there. The same corrupt incentives are still in place. The same degree of profiteering. The same blindness to risk. The same astonishing tolerance for ever-increasing debt. But don’t think all this means that things are as bad as they ever were. They’re not. They’re worse‌—‌much worse. Remember: Ponzi schemes can only operate because of their merry-go-round nature. New dummies providing the influx of funds to pay out the old dummies.

…

If you fancy treading still higher on the risk–reward ladder, there are additional steps which may appeal to a minority of confident investors. If you’re inclined to explore these upper steps, go ahead and do so‌—‌but always bearing in mind that as the opportunity for reward increases, so the risk of loss increases too. You need to evaluate your investments against your own risk tolerance‌—‌very low, low, medium, high, or very high. In general, younger folk can afford to invest a small proportion of their assets in well-researched medium- to high-risk opportunities; but no matter who you are, if you are attracted to high-risk opportunities, make sure you never invest money you can’t afford to lose.

I'm Feeling Lucky: The Confessions of Google Employee Number 59
by Douglas Edwards
Published 11 Jul 2011

Evidently, I was that fool. Others shared my incredulity. One engineer was so appalled by the plan that he considered writing a letter to the VCs on the board informing them we were about to lose all the money they had invested in us. Chad Lester—the omnivore engineer—however, celebrated our founder's risk tolerance. "I was excited about it," Chad told me after the fact. "It was like high school and TP-ing someone's house. Why not try it and see what happens?" I'd seen managers build consensus before moving ahead with unpopular decisions, and I knew bosses who dipped their toes in untested waters, fully prepared to pull out quickly if the temperature rose above or dropped below their comfort level.

Places of the Heart: The Psychogeography of Everyday Life
by Colin Ellard
Published 14 May 2015

The phenomenon has been repeated many times in many laboratories, including my own where we use the demonstration to interest students in issues related to embodiment. 7A technical account of remapping of space using pointers is provided by Longo and Lourenco of the University of Chicago in a paper titled “On the nature of near space: Effects of tool use and the transition to far space,” in Neuropsychologia (2006, Volume 44, pages 977–981). 8Amy Cuddy’s fascinating and popular TED talk can be found at http://www.ted.com/talks/amy_cuddy_your_body_language_shapes_who_you_are?language=en A technical paper describing some of the findings she discusses in the talk can be found in a paper titled “Power Posing: Brief Nonverbal Displays Affect Neuroendocrine Levels and Risk Tolerance,” in Psychological Science (2010, Volume 21, pages 1363–1368). 9Maarten Bos and Amy Cuddy describe the effects of use of electronic devices of varying size on power postures and, through this our behavior in a paper titled “iPosture: The Size of Electronic Consumer Devices Affects Our Behavior,” in Harvard Business School Working Paper (2013, No. 13-097).

Wait: The Art and Science of Delay
by Frank Partnoy
Published 15 Jan 2012

The brain scans of the subjects showed that they made superficial judgments primarily in the amygdalae, the neural regions that specialize in automatic processing, while individuated judgments were spread around a neural network of several other brain regions. It appears from this research that the amygdalae, though important and useful in numerous ways, also play a major role when we form implicit biases. 33. Dana R. Carney, Amy J. C. Cuddy, and Andy Yap, “Power Posing: Brief Nonverbal Displays Affect Neuroendocrine Levels and Risk Tolerance,” Psychological Science 21(10, 2010): 1363–1368. 34. Ibid., p. 9. Testosterone has been shown to blunt social emotions such as guilt, embarrassment, and anxiety; it makes both men and women feel less empathy. See Erno Jan Hermans, Peter Putman, and Jack van Honk, “Testosterone Administration Reduces Empathetic Behavior: A Facial Mimicry Study,” Psychoneuroendocrinology 31(2006): 859–866; Erno Jan Hermans, Peter Putman, Johanna M.

Running Money
by Andy Kessler
Published 4 Jun 2007

Treasuries, which are backed by the tax payments from the high wages that high-margin businesses pay to programmers and engineers versus low-paid factory workers. So far, so good. Foreigners own something like 45% of all Treasuries, some as reserves for their central banks in lieu of gold. Some of those dollars, which are more risk tolerant, buy corporate debt. But the real smart dollars are invested in the highmargin businesses directly. Those dollars can and do buy Intel stock or Microsoft stock. Directly and indirectly, those dollars invest in a high-margin economy. In fact, when they don’t, and invest at home, they almost always screw up.

Rethinking the Economics of Land and Housing
by Josh Ryan-Collins , Toby Lloyd and Laurie Macfarlane
Published 28 Feb 2017

Under such circumstances, it becomes difficult for the bank to estimate an interest rate that comfortably reflects the (unknowable) risk associated with the loan. An interest rate that covers this type of risk is likely to be very high and may lead to many reliable borrowers being priced out and only people with very high risk tolerance – ‘gamblers’ – choosing to take out loans. This problem is known as ‘adverse selection’ in the economics literature (Akerlof, 1970). Instead of using interest rates to determine borrowing decisions, the evidence suggests banks simply ration their lending quantitatively according to other criteria (Werner, 2005, pp. 194–196).

Frugal Innovation: How to Do Better With Less
by Jaideep Prabhu Navi Radjou
Published 15 Feb 2015

Within one year of its launch, more than 1,000 Ford employees had benefited from the TechShop membership. During this time, these tinkerers have helped Ford boost patentable ideas by over 100% (and the quality of patents has also risen) without having to spend significantly more on R&D. The more entrepreneurial and innovative culture has made Ford more open, agile and risk tolerant. Bill Coughlin, CEO of Ford Global Technologies (Ford’s intellectual property arm), who made it all happen, explains how TechShop has radically shifted the corporate culture:17 There is now greater appreciation for the value of new inventions. Killing a concept that’s only on paper is relatively easy, even a disruptive or breakthrough concept.

I, Warbot: The Dawn of Artificially Intelligent Conflict
by Kenneth Payne
Published 16 Jun 2021

But, like the centaur chess team, the creativity unleashed by human-machine collaboration points the way towards strategically useful AIs. A machine that throws up unexpected gibberish is of limited use to strategists, but in combination with humans, new creative possibilities emerge. The machine may produce surprises. It may make startling moves that appear bolder, or more risk tolerant than a human would make. Would human strategists working with the machine go along with that? The stakes in war would be rather higher than those facing the human part of the centaur chess team. If the machine says to do something whacky, like AlphaGo did in move 37, would you go along with its judgment?

Learn Algorithmic Trading
by Sebastien Donadio
Published 7 Nov 2019

It can be a command-line system or a user interface receiving the commands from the traders and sending the messages to the appropriate components. Let's have a look at the following diagram: As shown in the diagram, if we need to update the trading strategy parameters, the trader can use a text field on a web-based application to specify the risk tolerance the trading strategy can take. The number (corresponding to the tolerance limit) will be sent to the appropriate trading strategy. Services Additional components may be added to the trading system. We will talk about the following components (it is not an exhaustive list): Position server: This keeps track of all the trades.

How to Be the Startup Hero: A Guide and Textbook for Entrepreneurs and Aspiring Entrepreneurs
by Tim Draper
Published 18 Dec 2017

My mission has been to support them; to support these people who may be misunderstood, may be willing to take the company further to the edge of the cliff than their boards do, but still have the heart and vision that may change the world. They need the respect and protection to overcome nervous boards like ours that might not have the same vision or risk tolerance that they do. This one is for you, Bob, and for all of those entrepreneurs like you out there who make extraordinary sacrifices for their businesses, some coming up short and some going the distance. ✽✽✽ The Riskmaster *All Rights Reserved. Lyrics by Tim Draper Invested all his mattress money Divorced his prom queen hometown honey Scraping up his alimony Friends think he’s a little funny Needs a “world class CEO.”

Stealth
by Peter Westwick
Published 22 Nov 2019

Consider the words of a former military test pilot who came to the Skunk Works to fly the first Stealth prototypes: I must admit I was kind of surprised when I got to the Skunk Works. … I was surprised at the level of patriotism and how hard those people worked for the airplane. Rag-tag militia. I mean, you talk about beards and mustaches and long hair and tie-dyed shirts and all those things. … Tearaways. Free thinkers. Oh, yeah. Yep. And it’s encouraged.14 The region’s risk-tolerant, freethinking climate may help explain why Stealth emerged there. In the boom years of the 1950s and 1960s, as billions of federal dollars poured into Southern California, the hothouse atmosphere nourished countless intersections between aerospace and the broader culture. The LA architects William Pereira and Albert Martin Jr. rendered Space Age aesthetics in glass and steel for aerospace companies, in what has been described as “aerospace modernism.”15 In art, Robert Irwin worked with Lockheed and NASA engineers, exploring how the sensory deprivation of anechoic chambers or of astronauts in orbit affected aesthetic perception, while the Art and Technology movement sought to forge collaboration between leading artists such as Robert Rauschenberg and engineers at local aerospace firms.16 In literature, aerospace not only helped make LA a capital of science fiction; it also gave Thomas Pynchon his start (as a technical writer for Boeing), and he filled his books with aerospace allusions—including Gravity’s Rainbow, which he wrote in the late 1960s and early 1970s while living in Manhattan Beach, a beachside bedroom community for aerospace engineers from nearby TRW and Northrop.17 Aerospace engineers also helped create Southern California’s vaunted leisure culture.

The End of Wall Street
by Roger Lowenstein
Published 15 Jan 2010

Option ARMs were restyled as “Pick-A-Pay” loans, a name more evocative of lottery tickets than mortgages, and they were marketed to people who were simply unable to pay the full, “non-option” rate. Perhaps Herb Sandler, who had grown up on New York’s Lower East Side, the son of a gambler whose income was devoured by loan sharks, had some empathy with subprime borrowers—or perhaps, as with Killinger, the rising tide of risk tolerance loosened his moorings. The search for growth led Golden West inland to new developments in the California desert, where cookie-cutter homes and no-doc mortgages were the standard. By 2006, they had written more than $100 billion in ARMs,24 and though the Sandlers continued to insist on a margin of collateral, home values were so inflated, and loan applications so rife with fraud, that the quality of their book was as suspect as WaMu’s.

Other People's Money: Masters of the Universe or Servants of the People?
by John Kay
Published 2 Sep 2015

Advertisement for Patek Philippe, luxury watch manufacturer Businesses and households use the deposit channel to facilitate their everyday transactions. They also utilise it for short-term savings when they require a high degree of confidence that their money will be available in full when needed. Long-term savers select the investment channel, where they assume a degree of risk in the hope of higher returns. Long time horizons and greater risk-tolerance fit together: the more extended the time-scale, the greater the likelihood that an investment strategy that on average yields a higher return will actually do so. As I described in Chapter 5, the functions of the investment channel involve both search and stewardship. Through the search process described there, capital is allocated through the investment channel to various long-term uses, in business, investment, property and infrastructure.

Building Habitats on the Moon: Engineering Approaches to Lunar Settlements
by Haym Benaroya
Published 12 Jan 2018

Commonality of parts is a strategic goal, and therefore a design constraint. Here is one approach to a design framework . A large-scale lunar outpost, if designed for low risk to inhabitants, would be a complex and expensive undertaking, primarily because humans are very delicate. Instead, lunar settlements can be designed to higher risk tolerances with significant cost savings, but to ensure an overall high level of human safety, a number of smaller, much safer, emergency facilities can be placed throughout a settlement at easily accessible locations. These smaller facilities are designed to support the population for a significant amount of time – the time needed for rescue missions to arrive from the other settlements on the Moon, or Earth, depending on the time frame under consideration.

The Age of Turbulence: Adventures in a New World (Hardback) - Common
by Alan Greenspan
Published 14 Jun 2007

A recent poll shows that 71 percent of Americans agree that the free-market system is the best economic system available. Only 36 percent of the French agree. Another poll indicates that three-fourths of young French men and women aspire to a job in government. Few young Americans express that preference. Such numbers speak to a remarkable difference in risk tolerance. The French are far less inclined to suffer the competitive pressures of a free market and overwhelmingly seek the security of a government job, despite the widespread evidence that risk taking is essential for economic growth. I can't say the greater the risk taking, the greater the rate of growth.

…

This compression of risk premiums is global. I am uncertain whether in periods of euphoria people reach for an amount of risk that is at the outer limits of human tolerance, irrespective of the institutional environment in which they live. The prevailing financial infrastructure perhaps merely leverages this risk tolerance. For decades prior to the Civil War, banks had to hold capital well in excess of 40 percent to secure their notes and deposits. By 1900, national banks' capital cover was down to 20 percent of assets, to 12 percent by 1925, and below 10 percent in recent years. But owing to financial flexibility and far greater sources of liquidity, the fundamental risk borne by the individual banks, and presumably investors generally, may not have changed much over that time period.

Licence to be Bad
by Jonathan Aldred
Published 5 Jun 2019

We have already noted the preference for bell-curve thinking over the hard-won yet meagre rewards of Mandelbrotian maths. More generally, the idea that we can reduce uncertainty to a single number, a probability, appeals to our desire for simplicity, security and stability. Once captured in a single number, uncertainty can seemingly be controlled. We can choose the amount of risk we will tolerate. In parallel with the desire to control our destiny comes a set of beliefs suggesting that we can do so. Many people have a deep-rooted, barely conscious belief that there are stable patterns in history which will continue into the future. This connects to the way we understand most things in terms of narratives and stories.

Ashes to Ashes: America's Hundred-Year Cigarette War, the Public Health, and the Unabashed Triumph of Philip Morris
by Richard Kluger
Published 1 Jan 1996

Originals: How Non-Conformists Move the World
by Adam Grant
Published 2 Feb 2016

Ferris, and Emre Unlu, “It Takes Two: The Incidence and Effectiveness of Co-CEOs,” The Financial Review 46 (2011): 385–412; see also Ryan Krause, Richard Priem, and Leonard Love, “Who’s in Charge Here? Co-CEOs, Power Gaps, and Firm Performance,” Strategic Management Journal (2015) “entrepreneurs are significantly more risk-averse”: Hongwei Xu and Martin Ruef, “The Myth of the Risk-Tolerant Entrepreneur,” Strategic Organization 2 (2004): 331–55. successful entrepreneurs . . . stealing valuables: Ross Levine and Yona Rubinstein, “Smart and Illicit: Who Becomes an Entrepreneur and Does It Pay?,” National Bureau of Economic Research working paper no. 19276 (August 2013); Zhen Zhang and Richard D.

Beyond: Our Future in Space
by Chris Impey
Published 12 Apr 2015

It’s now an international activity; fewer than half of the satellites launched for commercial use are built in the United States (Figure 34).21 The economic viability of space tourism is difficult to extrapolate—its capabilities aren’t very impressive and its eventual size and long-term future are unclear. A few wealthy individuals have ponied up $20 million for a trip to the International Space Station, and it’s the belief of space visionaries that as the price comes down, the demand will increase. But there are wild cards, such as the risk tolerance of people indulging in a recreation that could lead to a grisly end. The best market study done so far is by the Futron Corporation, an aerospace consulting firm with no skin in the space-tourism game. For orbital trips, they assume that the $20 million price tag will come down to $5 million after twenty years.

The New New Thing: A Silicon Valley Story
by Michael Lewis
Published 29 Sep 1999

A simple-minded graph with an arrow pointing up and to the right illustrated the principle that the more risk you take with your money, the more you stand to gain or lose. In the past ten months Clark had "lost" $600 million simply by holding Page 164 on to his shares in Netscape. "If they only knew," he said. The Swiss banker chuckled unhappily. Clark remained straight-faced. His eyes drifted farther down the page, to a category marked "Return Objectives and Risk Tolerance." This was a summary of the typical Swiss banker's idea of the range of possible attitudes toward financial risk. It read, Conservative: I seek to... minimize investment volatility. Moderate Growth: I want to take some risk while also preserving capital. High Capital Growth: I have a minimum time horizon of five years with which to pursue my objectives.

Only Humans Need Apply: Winners and Losers in the Age of Smart Machines
by Thomas H. Davenport and Julia Kirby
Published 23 May 2016

• Elicit the information the system needs It’s often not that easy to get the information an automated decision system needs to do its work. In automated financial planning, for example, it’s relatively easy to figure out the ideal stock and bond portfolio for a wealthy individual. But if you’re trying to determine a family’s retirement needs, you have to input current spending levels, risk tolerance, likely retirement dates, and so forth. The client could enter that information him or herself, but it’s often difficult to come up with such data. A human financial planner can help to motivate clients and elicit difficult information. There are many other settings in which humans can play the same type of role

Forward: Notes on the Future of Our Democracy
by Andrew Yang
Published 15 Nov 2021

But change is not an absolute good. There are times when conscientiousness and a preservation of preexisting norms, relationships, and loyalties are just what you need. Right now many Americans are being buffeted by economic changes and institutional failures that are not benign; that’s the reality. Openness and risk tolerance are likely being reduced dramatically by the coronavirus and an increasingly punitive economy. A lot of people’s actions are going to be increasingly driven by a sense of threat to their way of life. This is not going to be a time for a lot of new generosity and openness. The question is, how do we dampen polarization and generate a new political language that people of both sides would find unifying or at least interesting?

Lessons from the Titans: What Companies in the New Economy Can Learn from the Great Industrial Giants to Drive Sustainable Success
by Scott Davis , Carter Copeland and Rob Wertheimer
Published 13 Jul 2020

Those risks were often ignored by those who negotiated the deals. Meanwhile the accounting around GE Capital took the company one more step away from reality. Welch even spoke about the art of moving dollars around each quarter to manage the ups and downs of divisional results. Immelt simply deepened the behavior and raised the risk tolerance. To boost sales and their own bonuses, salespeople gave more discounts and took on shaky customers. They offered more financing with longer terms and smaller down payments. In China, supposedly a GE strength, executives agreed to terms that produced short-term revenues at the cost of intellectual property.

Winners Take All: The Elite Charade of Changing the World
by Anand Giridharadas
Published 27 Aug 2018

Cuddy was nervous about speaking, for the first time, to hundreds of strangers who weren’t in her field, who weren’t enthusiastic students who had signed up for her class, who didn’t know any of the basic concepts of social psychology. Although her work on images of men in individualist and collectivist societies was on her mind, it may not have exhilarated PopTech. Another paper she had published, in Psychological Science, “Brief Nonverbal Displays Affect Neuroendocrine Levels and Risk Tolerance,” would become the basis for her talk. The stage lights came up from darkness. Cuddy stood center stage with her hands on her hips, her feet planted shoulder-width apart, tucked into a pair of brown cowboy boots that only added to what would come to be called her signature “power pose.” On the giant screen behind her was an image of Wonder Woman, whose hands and feet were in the same powerful posture, engaged in the same willful taking of space.

Chaos Engineering: System Resiliency in Practice
by Casey Rosenthal and Nora Jones
Published 27 Apr 2020

Slack is a service used by companies small and large to conduct their business; it is critical that the service is there for them all the time. Stated more formally, Slack does not have sufficient error budget to accept severe or lengthy customer impact as a result of one of these planned exercises. You may have more of an error budget or risk tolerance and, if you wield them effectively, end up learning more, more quickly, thanks to the exercises they allow you to plan. Data durability is even more of a priority. That isn’t to say that storage systems are not exercised by this process. Rather, it simply means the plans and contingencies for those plans must ensure that data is never irrecoverably lost.

The Stolen Year
by Anya Kamenetz
Published 23 Aug 2022

Ex-partners butted heads over visitation agreements because they were worried about the risk of travel, because one parent was an essential worker or lived in a COVID hotspot, because of a particularly vulnerable household member, or simply because of the added risk of moving between two different households. They argued over different rules and risk tolerances—over masking, indoor playdates, sending kids to school and daycare. Family courts were working less efficiently during the pandemic, making it harder to get clarity on disputes. If visitation stopped or decreased, the parent with primary custody, usually the mom, was left with even more responsibility than before.

Bad Science
by Ben Goldacre
Published 1 Jan 2008

You will need: One car battery charger Two large nails Kitchen salt Warm water One Barbie doll A full analytic laboratory (optional) This experiment involves electricity and water. In a world of hurricane hunters and volcanologists, we must accept that everyone sets their own level of risk tolerance. You might well give yourself a nasty electric shock if you perform this experiment at home, and it could easily blow the wiring in your house. It is not safe, but it is in some sense relevant to your understanding of MMR, homeopathy, post-modernist critiques of science and the evils of big pharma.

The Tao of Fully Feeling: Harvesting Forgiveness Out of Blame
by Pete Walker
Published 1 Jan 1995

Accordingly, I hope you will distinguish between those parenting practices that merit gratitude, and those that need to be repudiated. When we authentically forgive our parents, we know what we are forgiving them for, and what specifically was blameworthy about their behavior in the first place. If we do not recognize the exact nature of our parents’ transgressions, we risk tolerating similar kinds of hurtfulness in the present. Children who are not allowed to blame their parents’ bad behavior often become adults who do not protect themselves from abuse. There are many perpetrators who seem to have a sixth sense for identifying people who have lost the ability to protest and blame unfairness.

Irrational Exuberance: With a New Preface by the Author
by Robert J. Shiller
Published 15 Feb 2000

But when one looks at long-term data on stocks, bonds, and real estate, one finds that there has in fact been very little relation between their real values.12 Possibly these differences across asset classes could still be reconciled with a Baby Boom theory, by postulating that people in different age groups have different attitudes toward risk because of age-related differences in risk tolerance, that the stock market is relatively high now because the numerous people in their forties today are naturally less risk averse than older people. But such a theory has never been carefully worked out or shown to explain relative price movements. It is also noteworthy that the personal savings rate in the United States has recently been nearly zero, not significantly positive, as the life-cycle theory might suggest.

The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich
by Timothy Ferriss
Published 1 Jan 2007

The hysterical part is that, even after becoming aware of this bias, it’s hard to prevent the latter response. Therefore, I manipulate the environmental causes of poor responses instead of depending on error-prone self-discipline. I should not invest in public stocks where I cannot influence outcomes. Once realizing that almost no one can predict risk tolerance and response to losses, I moved all of my investments into fixed-income and cashlike instruments in July 2008 for this reason, setting aside 10% of pretax income for angel investments where I can contribute significant UI/design, PR, and corporate partnership help. (Suggested reading: Rethinking Investing—Part 1, Rethinking Investing—Part 2 on www.fourhourblog.com.)

Priceless: The Myth of Fair Value (And How to Take Advantage of It)
by William Poundstone
Published 1 Jan 2010

When losses are likely, reckless gambles become acceptable (lower left cell). At the end of the day, racetrack bettors are willing to “throw good money after bad” in the hope they can recoup their losses. When losses are unlikely (lower right), people are willing to insure themselves against them. Financial advisors tell clients to consider their “risk tolerance” in making money decisions. The trouble is, these four domains of behavior coexist in all of us. A person who is risk-averse in one situation will turn reckless in another. All it takes is a changed reference point. Investors regard bonds as “safe” and stocks as a gamble offering a higher average return.

Zero to Sold: How to Start, Run, and Sell a Bootstrapped Business
by Arvid Kahl
Published 24 Jun 2020

I sold FeedbackPanda because, among other reasons, I felt the need to diversify my assets. Having the biggest fraction of my wealth locked up in one business seemed more and more dangerous, and it kept me from experimenting and taking certain risks. If you want to keep running your business without projecting your personal risk tolerance onto it, consider the minority share sale or start investing your dividends in unrelated assets. Keeping the business and growing it into an even bigger enterprise is something that many founders who have been through it describe as an intensely rewarding and incredibly taxing experience. The great thing about increasing the value of your business every single day is that should you ever decide to sell it, the amount of money you will walk away with is growing as well.

Deaths of Despair and the Future of Capitalism
by Anne Case and Angus Deaton
Published 17 Mar 2020

But most servicemen who used opioids started very soon after arriving in Vietnam, and those who had seen more combat were no more likely to use. The most plausible story, and that of Lee Robins, one of the investigators, on whose description of events this account is based, is that these men used opioids because “they said it was enjoyable and made life in the service bearable.”28 They used opioids not to make combat risks tolerable—and they knew very well the risks of being high in combat—but because they were bored out of their minds. When they returned home and were no longer in the army, there were other means of enjoyment, and life made sense and was bearable without drugs. The environment matters. The drugs were also extraordinarily cheap in Vietnam.

Trillion Dollar Triage: How Jay Powell and the Fed Battled a President and a Pandemic---And Prevented Economic Disaster
by Nick Timiraos
Published 1 Mar 2022

After hailing the driver, the passenger is informed that this taxi can’t go anywhere due to a local ordinance mandating there always be at least one taxi at the station. A similar dynamic was unfolding with the big banks, which had larger cash reserves but were reluctant to use them because of their own risk-tolerance rules. Even though banks had fortified their balance sheets for a moment like this, a crisis was nevertheless the last moment in which they wanted to take steps that might weaken them. Investors recognized that banks had built cushions of capital to withstand a serious shock, but now were refusing to deploy them.

The Volatility Smile
by Emanuel Derman,Michael B.Miller
Published 6 Sep 2016

Unfortunately (from a theoretical point of view), jumps are inconsistent with arbitrage-free risk-neutral pricing, the bedrock of all the modeling we’ve done up to this point. The inconsistency stems from our inability to instantaneously hedge an option whose underlier can undergo many different jumps of different sizes. The alternative to risk-neutral pricing— economic models that depend on an individual’s subjective risk tolerance— are unattractive in that they demand detailed behavioral modeling. To avoid this, most jump-diffusion models simply assume risk-neutral pricing without convincing justification. Though they may be difficult to model, there have been and will be jumps in asset prices. Even if we can’t fully hedge them, we still need to understand how jumps impact option prices and the volatility smile.

A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation
by Richard Bookstaber
Published 5 Apr 2007

Even if we assume as a starting point that the stock market is a random walk and 168 ccc_demon_165-206_ch09.qxd 7/13/07 2:44 PM Page 169 T H E B R AV E N E W W O R L D OF HEDGE FUNDS is governed by rational behavior, and even if we assert at the outset that all trades reflect the full consideration of the most up-to-date information, merely the fact that there are winners and losers will lead to booms and busts that have little to do with the rational application of information.1 The simplest market cycle is based on two psychological characteristics of investors. First, their risk tolerance increases as their market winnings pile up. If you are making money, you will be willing to take proportionally more risk in the market.2 This is often termed the house effect, because it is akin to successful gamblers who raise their stakes because they are playing with the casino’s money. Second, the more people win, the smarter they think they are.

The Boom: How Fracking Ignited the American Energy Revolution and Changed the World
by Russell Gold
Published 7 Apr 2014

And that meant he needed to acquire mineral leases to the north of Fort Worth. He didn’t have to wait long. During the day, Mitchell and Houston’s other independent oilmen gathered on the ground floor of the Niels Esperson Building, a peculiar prewar edifice topped with what looks like a stone gazebo. For those with the right combination of money, ambition, risk tolerance, and luck, the Esperson was the first stop on the way to a midcentury career as a wildcatter. There was a bank of pay telephones at the back of the ground floor that functioned as a makeshift office for aspiring oilmen. There was a drugstore that served coffee and sandwiches. Bar stools surrounded several zinc-topped tables.

The Confidence Game: The Psychology of the Con and Why We Fall for It Every Time
by Maria Konnikova
Published 28 Jan 2016

Often, patient, levelheaded people will go a bit crazy in the wake of a major life change—we become more impulsive, less stable, riskier versions of ourselves. And our impulsivity and appetite for risk are some of the only reliable indicators of fraud susceptibility. In one study, risk takers were over six times more likely to fall victim than those whose risk tolerance was low. Given the right circumstances, just about anyone can fit that description. When we’re feeling low, we want to get out of the slump. So, schemes or propositions that would look absurd in another light suddenly seem more attractive. When we’re angry, we want to lash out. Suddenly, something that once seemed like a gamble looks awfully appealing.

The Hacker and the State: Cyber Attacks and the New Normal of Geopolitics
by Ben Buchanan
Published 25 Feb 2020

In 2019, someone with an anonymous Twitter account, who seemed to have intimate knowledge of NSA lingo, claimed that a group of former government insiders was responsible for the Shadow Brokers, but offered no evidence.42 If that tweet was accurate, there was no foreign hand behind the operation. Other well-known cybersecurity analysts suspected that an adversarial foreign government orchestrated the Shadow Brokers’ campaign. Given the Kremlin’s penchant for hacking and leaking operations and the Shadow Brokers’ elevated risk tolerance, Bruce Schneier and Matt Tait both theorized that the Shadow Brokers might be a direct Russian government operation.43 To these and other analysts, the group’s increasingly political statements in the fall of 2016 and into 2017 indicate something beyond just a disgruntled employee. Even if a Russian intelligence agency was not directly controlling the account, leaks from the United States’ investigation suggest some Russian government involvement.44 What form this took is unclear.

The Future Is Faster Than You Think: How Converging Technologies Are Transforming Business, Industries, and Our Lives
by Peter H. Diamandis and Steven Kotler
Published 28 Jan 2020

Since it can take more time to manage small investors than large investors, many wealth managers have investment minimums in the range of hundreds of thousands of dollars. But AI has leveled the playing field. Today, robo-advisors like Wealthfront and Betterment are bringing wealth management to the masses. Via an app, clients answer a series of initial questions about risk tolerances, investment goals, and retirement aims, and then algorithms take over. Actually, algorithms have already taken over. Every day, roughly 60 percent of all market trades are made by computer. When the market turns volatile, this can climb to as high as 90 percent. All robo-advisors have done is make the process available to the customer, and save the customer money as a result.

Moneyland: Why Thieves and Crooks Now Rule the World and How to Take It Back
by Oliver Bullough
Published 5 Sep 2018

Nevertheless, CUP decided not to publish the book. ‘The decision has nothing to do with the quality of your research or your scholarly credibility,’ the company’s Executive Publisher John Haslam wrote to her (according to copies of the letters that she provided to the Economist). ‘It’s simply a question of our risk tolerance in light of our limited resources.’ Haslam explained that the nature of English libel law obliged the writer and publisher to prove the truth of what they were saying, which would be extremely difficult, adding that this was one reason why English courts are so favoured by the world’s rich. He pointed out – in almost exactly the same words as I was told in legal comments about my article about the oligarch – that since Putin and his associates had never been convicted of a crime, it was impossible to say whether the allegations were true or not.

Toward Rational Exuberance: The Evolution of the Modern Stock Market
by B. Mark Smith
Published 1 Jan 2001

Greater sophistication on the part of economic policy makers, safety-net regulations like bank deposit insurance, and the ability of the Federal Reserve to act as the lender of last resort in a time of crisis all reduce the chance of exogenous shocks to the market that create instability, and risk. And finally, not to be underestimated, the willingness of many institutional and individual investors to buy into the notion that stocks are sound long-term investments, not to be quickly discarded in the face of temporary volatility, has effectively increased the risk tolerance of market participants. Market bears, of course, reject the Glassman-Hassert argument that stocks are no riskier than government bonds, contending that while the equity risk premium may have been too high in the past, it should certainly not fall to zero. (Some bears argue that the risk premium has fallen too far already.)

The Equality Machine: Harnessing Digital Technology for a Brighter, More Inclusive Future
by Orly Lobel
Published 17 Oct 2022

When I interviewed her, she was Zooming from her living room with two small children playing and doing remote learning in the background. She explained how Pymetrics forgoes what it sees as an archaic differentiator—namely, résumés and traditional markers of prestige—and instead asks applicants to play online games that measure cognitive and emotional attributes like decision-making, focus, generosity, fairness, and risk tolerance, among others.28 The company customizes these games for clients including Boston Consulting Group and JPMorgan Chase. She described how one large investment firm—which previously had hired primarily from a few top local universities and through referrals—shifted its hiring to more than sixty different schools, significantly increasing female and minority hiring as a result.

Warnings
by Richard A. Clarke
Published 10 Apr 2017

We postulate that there were four main reasons: the willingness by TEPCO and the Japanese government to accept an unusually high level of risk; a myth of nuclear safety pushed by the Japanese government; regulatory capture, the collusion of power companies and nuclear regulators; and, as we have seen in each preceding case, Initial Occurrence Syndrome. First, TEPCO’s risk tolerance in building and operating its nuclear facilities was apparently very high. Extensive efforts to conceal safety risks, going back decades, were exposed following the disaster. It became clear that although the events at the power plant had been set into motion by natural causes, human negligence and indifference played a large role in creating the conditions for the nuclear tragedy.

The Investment Checklist: The Art of In-Depth Research
by Michael Shearn
Published 8 Nov 2011

In contrast, if you bought a stock at 150 percent of book value and it earned 12 percent, then you would be receiving only an 8 percent rate of return. Based on valuation alone, which stock would you rather buy? How Is the Acquisition Financed? You need to determine how the acquisition is financed, which will give you an insight into the risk tolerance of the management team. In general, there are four ways an acquisition is financed: A business can issue debt, it can use the cash on its balance sheet, it can issue equity, or some combination of all three. Let’s look at each of these financing methods in more detail. Using Cash to Finance Acquisitions If an acquisition is financed using cash on the balance sheet, then management is highly conservative.

Machine, Platform, Crowd: Harnessing Our Digital Future
by Andrew McAfee and Erik Brynjolfsson
Published 26 Jun 2017

But the value of the Bitcoin, as expressed by its exchange rate against currencies like the dollar, fluctuated wildly, rising to a high of over $1,100 in November 2013 before plummeting 77% to less than $250 in January 2015 and then recovering to more than $830 two years later. This volatility made the digital currency interesting for risk-tolerant investors†† but unsuitable as a mainstream means of exchange or store of value. While the debate about Bitcoin’s ability to ever be a true currency was unfolding, a small group of people began to make a different point: that the truly valuable innovation was not the new digital money, but instead the distributed ledger that it rested on.

Stock Market Wizards: Interviews With America's Top Stock Traders
by Jack D. Schwager
Published 1 Jan 2001

But that's not the case, because of risk. As a professional gambler or as a trader, you are constantly walking the line between maximizing edge and minimizing your risk of tapping out. How do you decide what is the right balance? There is no single right answer to that question. It depends on the individual person's risk tolerance. Let's say you saved up enough money to live out your life in relative comfort but without the ability to make extravagant expenditures. I come along and offer to give you ten-to-one odds on the flip of a coin. The only catch is that you have to bet your entire net worth. That bet has a tremendous edge, but it is probably a bet that you wouldn't want to make, because the value of what you can gain, even though it is a much larger sum of money, is much less than the value of what you could lose.

Cybersecurity: What Everyone Needs to Know
by P. W. Singer and Allan Friedman
Published 3 Jan 2014

But imagine if you had a memo that you needed to get to your boss with absolutely no mistakes, at the risk of losing your job. Would you e-mail it if there were a 50 percent risk of it somehow being lost or changed en route? Or would you just hand-deliver it? What about if the risk were 10 percent? How about just 1 percent, but still at the risk of losing your job? Then apply the same risk tolerances when it’s your life in battle rather than your job. How do your risk numbers change? Computer network operations, though, won’t just be limited to targeting command and control with indirect effects. As more and more unmanned systems are introduced into warfare (the US military has over 8,000 “drones” like the famous Predator and Reaper, while over eighty countries now have military robotics programs), targeting command-and-control networks opens up even more direct avenues of attack.

Multicultural Cities: Toronto, New York, and Los Angeles
by Mohammed Abdul Qadeer
Published 10 Mar 2016

This approach is called group characteristics.15 Max Weber’s thesis of “the Protestant ethic and the spirit of capitalism” has long ruled over the theories of entrepreneurship.16 Similarly, the fact that Lebanese, Greeks, Syrians, and GujratiIsmailis have dominated local trade in Africa, the Gulf States, and even 94 Multicultural Cities some parts of the Caribbean has given rise to notions of their cultural proclivity for business. They have been given the name “middleman minorities” in contemporary economic sociology. Cultural theory attributes the entrepreneurial propensities of an ethnic group to such values as risk tolerance, family solidarity, frugality, hard work, adventurousness, and faith in one’s destiny as well as community obligations. It is presumed that some cultures cultivate these values and habits more than others. Another theory explaining the entrepreneurial propensity of some ethnic groups is called opportunity structure or the structural approach.17 It suggests that entrepreneurship is a matter of market conditions or opportunity structures.

The Job: The Future of Work in the Modern Era
by Ellen Ruppel Shell
Published 22 Oct 2018

For example, in Dashi Dash, Knack’s signature game, candidates are asked to play the role of a virtual server in a Japanese restaurant who must predict customers’ food preferences on the basis of their facial expressions while greeting and serving other customers. Halfteck said that one’s performance in Dashi Dash can within ten minutes sort out such attributes as emotional intelligence, risk tolerance, and adaptability to change. And it seems that not a few hiring managers agree: Knack claimed more than two hundred corporate clients in 2017. Yet while Knack and similar efforts are growing in popularity, there’s scant evidence that games offer a genuine improvement over more subjective methods of hiring.

The Invisible Hands: Top Hedge Fund Traders on Bubbles, Crashes, and Real Money
by Steven Drobny
Published 18 Mar 2010

Views sometimes count very little, whereas good risk management always counts a lot. The top performers in 2008 were able to put on good risk-versus-reward bets at the right time, and had the liquidity to do so due to good risk management. The old style of risk management suggests establishing a “diversified” portfolio with different asset weightings based on risk tolerance and time profile, which does not really work in this environment. If you are 60 years old, you are theoretically supposed to increase your bond weighting. But if you did that at the beginning of 2009—decreased your equities and increased your bonds—you virtually committed suicide. And if the inflation hawks are right, this may prove to be a really bad trade for a long period, even if your timing is reasonably good.

Inside the House of Money: Top Hedge Fund Traders on Profiting in a Global Market
by Steven Drobny
Published 31 Mar 2006

If two strategies are in the same market, say different parts of the U.S. yield curve, but are not correlated, we would be very comfortable allocating the maximum of risk to each one independently. Gorton: One of the restrictions of our fund being sold as an RV/macro fund is that we have a very low risk tolerance.We tell people that we will never lose more than 5 percent.To date, touch wood, we have never drawn down more than 3.5 percent.That means that even when we see outstanding opportunities, we cannot concentrate risk in that trade and we will underperform a bit.The portfolio effect of running RV and macro strategies has been quite strong but it also tends to skew performance to the middle of the range.

Stocks for the Long Run 5/E: the Definitive Guide to Financial Market Returns & Long-Term Investment Strategies
by Jeremy Siegel
Published 7 Jan 2014

Also see Nicholas Barberis, “Investing for the Long Run When Returns Are Predictable,” Journal of Finance, vol. 55 (2000), pp. 225-264. Paul Samuelson has shown that mean reversion will increase equity holdings if investors have a risk-aversion coefficient greater than unity, which most researchers find is the case. See Paul Samuelson, “Long-Run Risk Tolerance When Equity Returns Are Mean Regressing: Pseudoparadoxes and Vindications of ‘Businessmen’s Risk,’” in W. C. Brainard, W. D. Nordhaus, and H. W. Watts, eds., Money, Macroeconomics, and Public Policy, Cambridge, MA: MIT Press, 1991, pp. 181-200. See also Zvi Bodie, Robert Merton, and William Samuelson, “Labor Supply Flexibility and Portfolio Choice in a Lifecycle Model,” Journal of Economic Dynamics and Control, vol. 16, no. 3 (July-October 1992), pp. 427^50.

Limitless: The Federal Reserve Takes on a New Age of Crisis
by Jeanna Smialek
Published 27 Feb 2023

They started to lend out the gold itself or to write additional paper notes against it, so that their outstanding claims exceeded the gold on reserve in their vaults.[9] Money in the overall economy was multiplied, and more commerce could be undertaken. A deposit pile that was worth ten bills could generate more—maybe fifteen, maybe twenty, maybe thirty—depending on the risk tolerance of the banker and, in some cases, its agreements with its depositors. Unfortunately, fractional reserve arrangements had a destabilizing flaw. Fractional lenders without insurance were susceptible to runs. If people became nervous that a bank could not cover its obligations, they would rush to grab their deposits before there was nothing left.

Histamine Intolerance: A Comprehensive Guide for Healthcare Professionals
by Janice Joneja
Published 27 Nov 2017

No health care provider should indiscriminately advise a patient to avoid foods without (1) Evidence of their role in the condition and (2) Provision of a diet that will supply all nutrients from alternate sources. In my practice, I see this too often and it causes me great concern as it puts the patient at risk for nutritional deficiency and tends to direct attention away from other causes. Furthermore, if a person avoids foods for a prolonged period of time, they run the risk of losing tolerance to those foods and finds that they react adversely when they try to eat them again later. So many “doctors” do not appreciate the fundamental role of food in health and disease, and tend to toss out directives about diet without being adequately qualified to do so. The fact that you have lost 30 lbs. in 6 months is very worrying.

The Beginner's Guide to Histamine Intolerance
by Janice Joneja
Published 1 May 2017

No health care provider should indiscriminately advise a patient to avoid foods without (1) Evidence of their role in the condition and (2) Provision of a diet that will supply all nutrients from alternate sources. In my practice, I see this too often and it causes me great concern as it puts the patient at risk for nutritional deficiency and tends to direct attention away from other causes. Furthermore, if a person avoids foods for a prolonged period of time, they run the risk of losing tolerance to those foods and finds that they react adversely when they try to eat them again later. So many “doctors” do not appreciate the fundamental role of food in health and disease, and tend to toss out directives about diet without being adequately qualified to do so. The fact that you have lost 30 lbs. in 6 months is very worrying.

Systematic Trading: A Unique New Method for Designing Trading and Investing Systems
by Robert Carver
Published 13 Sep 2015

The Social Animal: The Hidden Sources of Love, Character, and Achievement
by David Brooks
Published 8 Mar 2011

He had his group prepare long presentations in which they presumed to lecture people about the industries they’d spent their whole lives mastering. They made presentations deliberately opaque as a way of demonstrating their own expertise. They didn’t understand that different companies have different risk tolerances. They didn’t understand that a particular CFO might be in a power struggle with a particular CEO and they should be careful not to make the latter’s life more difficult. There was no piece of office politics so obvious that they couldn’t be oblivious to it, no attempt at empathic accuracy they could not fail.

Handbook of Modeling High-Frequency Data in Finance
by Frederi G. Viens , Maria C. Mariani and Ionut Florescu
Published 20 Dec 2011

We explore how dynamic default correlation affects the serial correlation and overall distributions of tranche prices. 4.2 Description of the Products and Models 77 4.2 Description of the Products and Models The function of an MBS vehicle is to allocate capital from investors with a spectrum of risk tolerance to borrowers. Suppose there are investors labeled by interest rates r1 < · · · < rI that they seek, and there are borrowers whose risk levels qualify them for loan rates of r1 < · · · < rB . An MBS portfolio pools together the funds from the investors and issues mortgage loans to the borrowers from this pool (of course, the same considerations apply to other asset-backed loans).

Trend Following: How Great Traders Make Millions in Up or Down Markets
by Michael W. Covel
Published 19 Mar 2007

A diversified portfolio risking 2 percent on each of five instruments has a total heat of 10 percent, as does a portfolio risking 5 percent on each of two instruments.”16 Chauncy DiLaura, a student of Seykota’s, adds to the explanation, “There has to be some governor so I don’t end up with a whole lot of risk. The size of the bet is small around 2 percent.” Seykota calls his risk-adjusted equity “core equity” and the risk tolerance percentage “heat.” Hcan be turned up or down to suit the trader’s pain tolerance—as the heat gets higher, so do the gains, but only up to a point. Past that point, more heat starts to reduce the gain. The trader must be able to select a heat level where he is comfortable.17 Also critical is how you handle your capital as it grows or shrinks.

The Future of the Internet: And How to Stop It
by Jonathan Zittrain
Published 27 May 2009

This is a variant of Lessig’s idea for a “kid enabled browser,” made much more robust because a tethered appliance is difficult to hack.150 These paternalistic interventions assume that people will be more careful about what they put online once they grow up. And even those who are not more careful and regret it have exercised their autonomy in ways that ought to be respected. But the generational divide on privacy appears to be more than the higher carelessness or risk tolerance of kids. Many of those growing up with the Internet appear not only reconciled to a public dimension to their lives– famous for at least fifteen people—but eager to launch it. Their notions of privacy transcend the Privacy 1.0 plea to keep certain secrets or private facts under control. Instead, by digitally furnishing and nesting within publicly accessible online environments, they seek to make such environments their own.

SuperBetter: The Power of Living Gamefully
by Jane McGonigal
Published 14 Sep 2015

Juliet Schor, Plenitude: The New Economics of True Wealth (New York: Penguin Press, 2010). 4. John De Graaf, ed., Take Back Your Time: Fighting Overwork and Time Poverty in America (San Francisco: Berrett-Koehler, 2003). 5. Dana R. Carney, Amy J. C. Cuddy, and Andy J. Yap, “Power Posing: Brief Nonverbal Displays Affect Neuroendocrine Levels and Risk Tolerance,” Psychological Science 21, no. 10 (2010): 1363–68. 6. Alice Moon and Serena Chen, “The Power to Control Time: Power Influences How Much Time (You Think) You Have,” Journal of Experimental Social Psychology 54 (2014): 97–101. 7. Cassie Mogilner, Zoë Chance, and Michael I. Norton, “Giving Time Gives You Time,” Psychological Science 23, no. 10 (2012): 1233–38. 8.

The Case Against Education: Why the Education System Is a Waste of Time and Money
by Bryan Caplan
Published 16 Jan 2018

In recent years, the nominal rate on a 30-year Treasury bond has been about 4%; subtracting forecasted inflation leaves a real return of only 2%.6 The oft-quoted “10% long-run return on stocks,” similarly, falls to around 7% after subtracting long-run inflation. One last question: What’s a good rate of return? A bad rate? The evasive will tell you, “It depends on current interest rates, risk, risk tolerance, liquidity, leverage, the rest of your portfolio, and beyond.” So true, yet so useless. In lieu of this evasive answer, I employ these helpful rules of thumb: An inflation-adjusted return of 10% is excellent. A 7% return is very good—about average for stocks. Five percent is pretty good. Three percent is so-so.

Spies, Lies, and Algorithms: The History and Future of American Intelligence
by Amy B. Zegart
Published 6 Nov 2021

What is ironic is that individuals who attribute others’ behavior to deep hostility are quite likely to explain away their own behavior as a result of being “pushed into a corner” by an adversary.63 History is filled with crises in which one country either overestimated the hostile motives of another or underestimated how threatening its own actions could appear to the other side, or both.64 Take, for example, the First Gulf War and the Iraq War, in which both the United States and Iraq largely misunderstood the other’s view. Iraq underestimated the United States’ risk tolerance following the Cold War and 9/11, and the United States failed to see that Saddam was much more concerned about the Iranian threat than the American one. In both 1990 and 2003, an incomplete picture of the other side’s intentions and motives led to costly conflict between the two countries.65 During the Korean War, many U.S. officials believed that marching through North Korea toward the Chinese border would not be seen as threatening to China.

The Price Is Wrong: Why Capitalism Won't Save the Planet
by Brett Christophers
Published 12 Mar 2024

The same executive continued, ‘For a time, we had a kind of blanket refusal to take merchant risk. That’s not very practical in the current circumstances – but we still don’t like it.’11 As these quotes suggest, banks are sometimes willing to finance merchant projects in the renewables space. But it tends to be only banks with a particularly high risk tolerance. More importantly, given the risk exposure, such lending inevitably comes at a cost to the borrower, which is to say the developer. The way that Gifford and his co-authors explained this logic was to say that ‘investors rightly require higher expected returns, often in the mid to high teens, to compensate for the risk of investing in a highly cyclical industry’.12 How this works from the lender’s perspective is further fleshed out in the following statement, made by another banker who, like the individual who referred to a blanket refusal to take merchant risk, also works at a European bank that is active in the renewables market.

The Skeptical Economist: Revealing the Ethics Inside Economics
by Jonathan Aldred
Published 1 Jan 2009

Blockchain Chicken Farm: And Other Stories of Tech in China's Countryside
by Xiaowei Wang
Published 12 Oct 2020

Analysis of Financial Time Series
by Ruey S. Tsay
Published 14 Oct 2001

Different choices of the threshold η lead to different estimates of the shape parameter k (and hence the tail index −1/k). In the literature, some researchers believe that the choice of η is a statistical problem as well as a financial one, and it cannot be determined purely based on the statistical theory. For example, different financial institutions (or investors) have different risk tolerances. As such, they may select different thresholds even for an identical financial position. For the daily log returns of IBM stock considered in this chapter, the calculated VaR is not sensitive to the choice of η. The choice of threshold η also depends on the observed log returns. For a stable return series, η = −2.5% may fare well for a long position.

Thinking, Fast and Slow
by Daniel Kahneman
Published 24 Oct 2011

Daniel Kahneman and Amos Tversky, “On the Reality of Cognitive Illusions,” Psychological Review 103 (1996): 582–91. offered plausible alternatives: Some examples from many are Valerie F. Reyna and Farrell J. Lloyd, “Physician Decision-Making and Cardiac Risk: Effects of Knowledge, Risk Perception, Risk Tolerance and Fuzzy-Processing,” Journal of Experimental Psychology: Applied 12 (2006): 179–95. Nicholas Epley and Thomas Gilovich, “The Anchoring-and-Adjustment Heuristic,” Psychological Science 17 (2006): 311–18. Norbert Schwarz et al., “Ease of Retrieval of Information: Another Look at the Availability Heuristic,” Journal of Personality and Social Psychology 61 (1991): 195–202.

The Secret of Our Success: How Culture Is Driving Human Evolution, Domesticating Our Species, and Making Us Smarter
by Joseph Henrich
Published 27 Oct 2015

Cambridge, MA: Schenkman. Cappelletti, D., W. Guth, and M. Ploner. 2011. “Being of two minds: Ultimatum offers under cognitive constraints.” Journal of Economic Psychology 32 (6):940–950. Carney, D. R., A. J. C. Cuddy, and A. J. Yap. 2010. “Power posing: Brief nonverbal displays affect neuroendocrine levels and risk tolerance.” Psychological Science 21 (10):1363–1368. Carreiras, M., M. L. Seghier, S. Baquero, A. Estevez, A. Lozano, J. T. Devlin, and C. J. Price. 2009. “An anatomical signature for literacy.” Nature 461 (7266):983–986. doi:10.1038/nature08461. Carrier, D. R. 1984. “The energetic paradox of human running and hominid evolution.”

Ctrl Alt Delete: Reboot Your Business. Reboot Your Life. Your Future Depends on It.
by Mitch Joel
Published 20 May 2013

Transport for Humans: Are We Nearly There Yet?
by Pete Dyson and Rory Sutherland
Published 15 Jan 2021

Seeking SRE: Conversations About Running Production Systems at Scale
by David N. Blank-Edelman
Published 16 Sep 2018

For those who work in companies that had an SRE model from inception, the following ideas might be self-evident. For those who work in traditional enterprise IT operations, these ideas often highlight how much of a departure the SRE model is from traditional operations beliefs and practices. Error Budgets There are often tensions in an organization over how much risk is tolerable for a particular service and who is responsible when the Service-Level Objectives (SLOs) are not met. In traditional enterprise divides, the product end of a company is incentivized to go faster, and the operations end is incentivized to avoid downtime and other performance problems. This is the type of mismatch in incentives that encourages silos to form.

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A Culture of Database Reliability Engineering The reason I feel there a real need for an emphasis on reliability in not just the job title of the DBRE, but in everything they do, is because the database is one of those places where risk and chaos simply has no place. A lot of what is now commonplace in our day-to-day work came about from innovation in areas of computing where risk could be tolerated. Now that these paradigms are ubiquitous, it is up to the stewards of one of the organization’s most precious resources, the data, to find paths to bring databases into the fold. Much of the work to make persistent data stores a first-class citizen of the world of reliability engineering is still in its early phases.

The Crisis of Crowding: Quant Copycats, Ugly Models, and the New Crash Normal
by Ludwig B. Chincarini
Published 29 Jul 2012

In April 2007, Kirk e-mailed Gelband: As a heads up our risk of mandated commits is up to 6mm a bp triple our previous high. Also the commits are coming in fast and furious I expect us to be well north of 30B this quarter. This is also unprecedented. In addition we are now seeing commitments that have crossed the risk tolerance so we may need your help with the bank in saying no to some key clients. —Alex Kirk, Head of Credit Business, e-mail to Michael Gelband, April 20, 2007 (Valukas 2010) Soon after that, Lehman fired Gelband.21 Lawrence McCarthy, another important part of fixed-income trading, left shortly thereafter.

The Simple Living Guide
by Janet Luhrs
Published 1 Apr 2014

If you make it too expensive to dip into, you’ll be more likely to ignore your rationalizing voice when it starts begging you to spend the money. Luckily for you, hands-off accounts pay much higher interest rates than do short-term CDs or money market accounts. There are many types of short- and long-term investments. The kind you choose depends on your risk tolerance level. The higher the risk, the greater return you can earn. If gambling on some high-risk stock causes you to be up at night worrying, then the benefits are lost and you are farther away from that simpler, more peaceful life that you are working toward. The following chart explains these various levels of investments.

Elon Musk
by Walter Isaacson
Published 11 Sep 2023

Red Flags: Why Xi's China Is in Jeopardy
by George Magnus
Published 10 Sep 2018

They tend to be driven more by university research activities, small teams, and bottom-up pressure groups. China says that it is developing a greater tolerance for risk but the systems employed to evaluate and promote scientists, projects and methods of learning are not really compatible with at least the kind of risk encouragement and tolerance accepted in the West. China expects its tech companies to play a central role in government industrial policies, and meet quantitative goals. These include specific targets for domestic market share, generally in the range of 70–80 per cent, by 2030. They apply to smart manufacturing, including robotics and components, cloud computing and big data, and information technology.

Ask Your Developer: How to Harness the Power of Software Developers and Win in the 21st Century
by Jeff Lawson
Published 12 Jan 2021

That mindset arises from the way many cultures respond to failure. The norm is that if you launch a big initiative and it fails (in any department, not just tech), it would certainly limit your career. In more agile cultures, failure isn’t punished. Instead, it’s a learning opportunity. The mindset of embracing risk and tolerating failure is a huge part of the software ethos. It’s also one of the biggest things that old companies avoid—even those with leaders who claim, as many do, that they want to become more like a startup. This brings me to an important point: If you want to become a software builder, you need to start by changing the mindset of the entire organization.

Debunking Economics - Revised, Expanded and Integrated Edition: The Naked Emperor Dethroned?
by Steve Keen
Published 21 Sep 2011

(McKibbin and Stoeckel 2009: 584; emphases added) As with Ireland, they manipulate the shocks applied to their model until its short-run deviations from the steady state mimic what occurred during the Great Recession, and as with Ireland, one shock is not enough – three have to be used: 1 the bursting of the housing bubble, causing a reallocation of capital and a loss of household wealth and drop in consumption; 2 a sharp rise in the equity risk premium (the risk premium of equities over bonds), causing the cost of capital to rise, private investment to fall, and demand for durable goods to collapse; 3 a reappraisal of risk by households, causing them to discount their future labor income and increase savings and decrease consumption. (Ibid.: 587) Not even this was enough to replicate the data: they also needed to assume that two of these ‘shocks’ – the risk tolerances of business and households – changed their magnitudes over the course of the crisis. A previous paper had found that ‘a temporary shock to risk premia, as seems to have happened in hindsight, does not generate the large observed real effects,’ so they instead considered an extreme shock, followed by an attenuation of it later: ‘The question is then, what would happen if business and households initially assumed the worst – that is, a long lasting permanent rise in risk premia – but unexpectedly revised their views on risk to that of a temporary scenario 1 year later whereby things are expected to return to “normal”?’

Advanced Software Testing—Vol. 3, 2nd Edition
by Jamie L. Mitchell and Rex Black
Published 15 Feb 2015

This standard applies to embedded software that controls systems with safety-related implications, as you can tell from its title, Functional Safety of Electrical/Electronic/Programmable Electronic Safety-Related Systems. The standard is very much focused on risks. Risk analysis is required. It considers two primary factors as determining the level of risk, likelihood, and impact. During a project, we are to reduce the residual level of risk to a tolerable level, specifically through the application of electrical, electronic, or software improvements to the system. The standard has an inherent philosophy about risk. It acknowledges that we can’t attain a level of zero risk—whether for an entire system or even for a single risk item. It says that we have to build quality, especially safety, in from the beginning, not try to add it at the end.

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This standard applies to embedded software that controls systems with safety-related implications, as you can tell from its title, “Functional safety of electrical/electronic/programmable electronic safety-related systems.” The standard is very much focused on risks. Risk analysis is required. It considers two primary factors as determing the level of risk: likelihood and impact. During a project, we are to reduce the residual level of risk to a tolerable level, specifically through the application of electrical, electronic, or software improvements to the system. The standard has an inherent philosophy about risk. It acknowledges that we can’t attain a level of zero risk—whether for an entire system or even for a single risk item. It says that we have to build quality, especially safety, in from the beginning, not try to add it at the end.

Paper Money Collapse: The Folly of Elastic Money and the Coming Monetary Breakdown
by Detlev S. Schlichter
Published 21 Sep 2011

Stealing Fire: How Silicon Valley, the Navy SEALs, and Maverick Scientists Are Revolutionizing the Way We Live and Work
by Steven Kotler and Jamie Wheal
Published 21 Feb 2017

Foolproof: Why Safety Can Be Dangerous and How Danger Makes Us Safe
by Greg Ip
Published 12 Oct 2015

Philanthrocapitalism
by Matthew Bishop , Michael Green and Bill Clinton
Published 29 Sep 2008

The result, in both spheres, is that he takes big risks, moves fast, pursues lots of different strategies at once, and takes controversial positions. He regards as a strength the ability of his foundations to “proceed by way of trial and error.” He says he is “ready to accept errors and to abandon projects when they fail. This gives us a comparative advantage. Bureaucracies find it difficult to admit failure; this makes them risk averse. We can tolerate risks; therefore we can reap greater rewards.” Sometimes Soros gives money to campaigns that he expects to fail simply to send a message by taking a stand. Unlike most traditional foundations, he does not shy away from taking on causes that will win him no friends. “In the social sphere, I take positions because I believe in them, whether I succeed or not.

Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State
by Paul Tucker
Published 21 Apr 2018

28 Posner and Vermeule, Executive Unbound; Wallach, To the Edge. 29 Hegel, Philosophy of Right, sections 287–297. 30 Wilson, “Study of Administration.” 31 Majone, Regulating Europe, chapter 3; Thatcher, “Delegation”; and Levi-Faur and Gilad, “Transcending the Privatization Debate,” an extended review of three books on regulation. The shift in risk tolerance, together with a preference, novel in the UK, for rules-based regulation and compliance cultures, is the subject of one of those books: Power, Audit Society. 32 Muller, “Triumph of What.” 33 Chief Justice Hewart’s 1929 book The New Despotism, a blistering attack on the burgeoning administrative state, led to a government-sponsored review.

Rework
by Jason Fried and David Heinemeier Hansson
Published 9 Mar 2010

A Short Guide to a Long Life
by David B. Agus
Published 7 Jan 2014

Culture of Terrorism
by Noam Chomsky
Published 19 Oct 2015

Still, there is the danger that “the Sandinistas will infiltrate [neighboring] countries with Marxist-trained student, union and peasant leaders promoting Nicaragua’s ‘revolution without frontiers’.”6 The New York Times editors, contemplating the likely failure of the U.S. military option, propose that Washington take a “calculated risk” and “tolerate a Marxist neighbor, if it is boxed in by treaties and commitments to rudimentary human rights.” The Sandinistas would have to agree “to keep Soviet and Cuban bases, advisers and missiles out of Nicaragua,” and to observe human rights, a major issue standing alongside of U.S. security concerns, because Washington and its Central American allies “rightly see a connection between internal and external behavior.”7 One hardly knows which of these two ideas is more bizarre: the demand that Nicaragua adhere to treaty limitations barring foreign bases and advisers and missiles (the missiles added gratuitously by the Times editors to induce the proper hysteria)—agreements that Nicaragua has consistently supported along with controls to prevent cross-border operations, in vain, since the U.S. will accept no such constraints; or the concern over human rights violations in Nicaragua, real enough to be sure, but slight in comparison with those conducted by Times favorites, whose atrocities apparently raise no problem about a “connection between internal and external behavior,” and are of little significance in any event, being directed against the poor majority who are the natural enemy of the Free Press.

Fool's Gold: How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe
by Gillian Tett
Published 11 May 2009

The ruling attracted almost no attention in the press at the time, since it seemed highly technical, but it had one very considerable consequence: it raised the competitive pressure on the brokerages even further. By 2005, it had become clear that a key reason why Goldman Sachs was producing such stellar earnings was that it had raised its leverage. Merrill Lynch and the others were therefore under intense pressure to follow suit, and, that being the case, the increased leverage of super-senior risk was tolerated. The three other major brokerages—Bear Stearns, Morgan Stanley, and Lehman Brothers—also built up some super-senior exposure. Bear and Lehman had extensive experience in dealing with mortgage-backed bonds, and they prided themselves on running tight risk controls. As they each cranked up their CDO machines, they realized that super-senior risk was becoming like the toxic by-product of a chemical experiment or waste from a nuclear reactor.

Slack: Getting Past Burnout, Busywork, and the Myth of Total Efficiency
by Tom Demarco
Published 15 Nov 2001

Change can’t happen without risk, and risk-taking is only possible in an environment that can be tolerant of at least some failure. There is a paradox at work here: Making it okay to take risks and succeed in risky endeavors requires that you also make it okay to fail. If you’re having trouble with the notion that risk-taking requires tolerance for failure, consider the opposite: punishment for failure. Potential punishment is often justified as a way to assure success; it is more often a deterrent to taking any risks at all. Summary: The Requisites of Reinvention Reinvention takes place in the middle of the organization, so the first requisite is that there has to be a middle.

Beyond the 4% Rule: The Science of Retirement Portfolios That Last a Lifetime
by Abraham Okusanya
Published 5 Mar 2018

The Art of SEO
by Eric Enge , Stephan Spencer , Jessie Stricchiola and Rand Fishkin
Published 7 Mar 2012

Consider this only if you are willing to invest in putting rich original content on the site, and if you are willing to invest the time to promote the site as an independent site. Such a site may gain more links by being separated from the main commercial site. A microsite may also have the added benefit of bypassing some of the legal and PR department hurdles and internal political battles. This could be a key consideration if you’re at a monolithic or low risk-tolerance organization. However, a microsite on a brand new domain may wallow in the Google sandbox for months (for more about the Google sandbox, see Determining Searcher Intent and Delivering Relevant, Fresh Content). So, what to do if you want to launch a microsite? Consider buying an aged, reputable “aftermarket” domain—one that has had a quality site on it for a while (parking pages don’t count!)

Fault Lines: How Hidden Fractures Still Threaten the World Economy
by Raghuram Rajan
Published 24 May 2010

Instead, the risk premium on long-term government bonds—the additional spread that the market demands to take the risk of bond prices fluctuating—fell even as the Fed raised short-term interest rates, with the result that long-term interest rates fell and bond prices rose.7 Indeed, a generally low premium for risk ensured that the prices of all risky or long-term assets, including housing, rose, even as the Fed raised rates slowly. The Fed’s policy seemed to be working because it made risk more tolerable! The Fed did worry about the deteriorating quality of lending and made some supervisory noises over time. But with its foot pressed firmly on the interest-rate accelerator, the supervisory measures were ineffective. Ultimately, it was probably also Fed actions that brought the party to an end.

The Devil's Derivatives: The Untold Story of the Slick Traders and Hapless Regulators Who Almost Blew Up Wall Street . . . And Are Ready to Do It Again
by Nicholas Dunbar
Published 11 Jul 2011

Crashed: How a Decade of Financial Crises Changed the World
by Adam Tooze
Published 31 Jul 2018

Banks were not so much told what to do as they were invited to demonstrate that they were not in violation of the rule. What exactly would constitute proof of compliance was a matter for further negotiation.54 The best advice the lawyers could offer was that it was up to banks to decide the level of “regulatory risk tolerance” they were comfortable with. After passing the law in July 2010 and issuing the “final” formulation of the Volcker rule in December 2013, 2014 began with a new round of discussions about the “guidance” that would be issued to explain those regulatory risks. The only thing that was clear was that it would generate enormous demand for compliance officers and corporate lawyers.

Palo Alto: A History of California, Capitalism, and the World
by Malcolm Harris
Published 14 Feb 2023

In other words, these companies got big extremely fast, and these networks tended toward monopoly and oligopoly. Meaning that if these firms could use marketing and low prices to expand their user bases exponentially, they could jump from zero to billion-dollar monopolies in a process that looks more like the flipping of a binary switch than growing a company. Sophisticated and risk-tolerant venture capitalists could take an idea, just a prototype and a few sheets of paper sometimes, and build it into one of these firms in a year or two. (The expansion of consumer credit helped, too, and early start-ups were often financed on a house of founder credit cards.) Of course there were many millions of dollars in public money underlying those ideas, but Bayh-Dole and Stanford’s OTL gave the spin-off model an academic Kosher stamp.

Trade Your Way to Financial Freedom
by van K. Tharp
Published 1 Jan 1998

We provide that with four different programs that strive for returns in the 10 to 20 percent range with lower drawdowns. We’re looking for returns of 20 percent with 10 percent drawdowns. Our clients know that so that’s what they’re getting in terms of their goals. Since you are trading clients’ money, how much risk can they tolerate? When would they be likely to withdraw their money? They expect risk in the 5 to 10 percent range. Any drawdown that is over 15 percent or that lasts over a year is deadly—lots of clients would fire us. For that matter, how much gain can they tolerate before they get too excited? Gains over 25 percent definitely get noticed.

…

Very sophisticated traders? Institutional clients? What are your clients like? What are their goals? What kind of service do you provide for them? For example, by putting their money with you, are they attempting a special type of diversification? Since you are trading clients’ money, how much risk can they tolerate? When would they be likely to withdraw their money? For that matter, how much gain can they tolerate before they get too excited? What kind of fees do you charge? In other words, what is the total amount extracted from the client’s account each quarter or month? What kinds of returns will you have to make in order to be able to satisfy a client who is subject to those fees?

The Intelligent Investor (Collins Business Essentials)
by Benjamin Graham and Jason Zweig
Published 1 Jan 1949

A Failure of Capitalism: The Crisis of '08 and the Descent Into Depression
by Richard A. Posner
Published 30 Apr 2009

The Payoff
by Jeff Connaughton

Rather than curb its reckless practices, it decided to try to sell a higher proportion of these risky, fraud-tainted mortgages into the secondary market, thereby locking in a profit for itself as it spread the contagion into the capital markets. The second hearing showed that OTS had failed abjectly to regulate WaMu and to protect the public from the consequences of WaMu’s excessive risk-taking and toleration of widespread fraud. Although WaMu accounted for 25 percent of OTS’s regulatory portfolio, OTS adopted a laissez-faire approach. OTS’s front-line bank examiners had identified the high prevalence of fraud and weak internal controls at WaMu, yet the OTS leadership did virtually nothing to address the situation.

Happy City: Transforming Our Lives Through Urban Design
by Charles Montgomery
Published 12 Nov 2013

The Birth of the Pill: How Four Crusaders Reinvented Sex and Launched a Revolution
by Jonathan Eig
Published 12 Oct 2014

Money and Power: How Goldman Sachs Came to Rule the World
by William D. Cohan
Published 11 Apr 2011

But was this relentless focus on profit a recipe for dispensing with the system of “checks and balances” that was in place to prevent conflicts between client needs and Goldman’s own trading accounts? This question would come back to haunt Goldman with a vengeance in 2010. To Corzine, the lessons of 1994 were clear. “Permanency of capital was essential,” he said. “You could not have everybody’s life at risk because people have different risk tolerances and can take their capital out at a moment’s notice. I didn’t have religious fervor [about an IPO] in 1986, but I was supportive. I had religious fervor after 1994 because you can’t have a two-hundred-and-fifty-billion-dollar balance sheet stretched around the world, operating twenty-four hours a day built on capital that could walk out the door and have no real transparency whatsoever about what you’re doing.”

Behave: The Biology of Humans at Our Best and Worst
by Robert M. Sapolsky
Published 1 May 2017

Prehn et al., “Chemosensory Anxiety Signals Augment the Startle Reflex in Humans,” Nsci Letters 394 (2006): 127. 26. H. Critchley and N. Harrison, “Visceral Influences on Brain and Behavior,” Neuron 77 (2013): 624; D. Carney et al., “Power Posing Brief Nonverbal Displays Affect Neuroendocrine Levels and Risk Tolerance,” Psych Sci 21 (2010): 1363. Some related findings: A. Hennenlotter et al., “The Link Between Facial Feedback and Neural Activity Within Central Circuitries of Emotion: New Insights from Botulinum Toxin–Induced Denervation of Frown Muscles,” Cerebral Cortex 19 (2009): 357; J. Davis, “The Effects of BOTOX Injections on Emotional Experience,” Emotion 10 (2010): 433. 27.

Who's Your City?: How the Creative Economy Is Making Where to Live the Most Important Decision of Your Life
by Richard Florida
Published 28 Jun 2009

Brilliant, Crazy, Cocky: How the Top 1% of Entrepreneurs Profit From Global Chaos
by Sarah Lacy
Published 6 Jan 2011

The common answer was a cocktail of elements, including top universities, proximity to venture investors, local professionals like lawyers and accountants skil ed at serving high-growth companies, existing high-tech companies that could create a skil ed workforce, and an environment that encourages risk taking and tolerates failure. Here’s the mystery of Israel: If you take out that last one about risk taking, Israel had none of these advantages and had the added disadvantages of a tiny domestic market surrounded by enemies and embroiled in near-constant violence. Yet in the 1990s, Israel experienced an entrepreneurial miracle.

Culture and Prosperity: The Truth About Markets - Why Some Nations Are Rich but Most Remain Poor
by John Kay
Published 24 May 2004

Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future
by Ashlee Vance
Published 18 May 2015

The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer
by Dean Baker
Published 15 Jul 2006

Future Perfect: The Case for Progress in a Networked Age
by Steven Johnson
Published 14 Jul 2012

A Crack in the Edge of the World
by Simon Winchester
Published 9 Oct 2006

The National Board of Fire Underwriters had remarked only the year before, after an extensive survey, that the city remained a tinderbox, waiting to be consumed once again as it had been six times already in the half century of its existence. Chief Sullivan concurred, often vehemently. Such was the flammability of its structures, the lack of water, the vulnerability of the supply and the eccentric siting of some of the fire stations that insurers found the risks barely tolerable. There were only thirty-eight steam-powered fire engines in service, and tests had shown they could deliver water at only 70 per cent of their rated capacity – much too low for comfort. The men who manned the engines were poorly trained. There were too few hydrants, and the old cisterns that long before had been built to store water below intersections in the city-centre were rusty and empty and unused.

The Vast Unknown: America's First Ascent of Everest
by Broughton Coburn
Published 29 Apr 2013

Warren Buffett Accounting Book: Reading Financial Statements for Value Investing (Warren Buffett's 3 Favorite Books)
by Stig Brodersen and Preston Pysh
Published 30 Apr 2014

Meet the Frugalwoods: Achieving Financial Independence Through Simple Living
by Elizabeth Willard Thames
Published 6 Mar 2018

Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School
by Andrew Hallam
Published 1 Nov 2011

A Generation of Sociopaths: How the Baby Boomers Betrayed America
by Bruce Cannon Gibney
Published 7 Mar 2017

Snakes in Suits: When Psychopaths Go to Work
by Dr. Paul Babiak and Dr. Robert Hare
Published 7 May 2007

Furthermore, not everything changes at the same rate, and interrelated elements become unglued, adding confusion to an already unstable time. Organizations in a constant state of transitioning are characterized by unclear, outdated, unenforceable, or nonexistent work rules and policies; inconsistent risk taking; greater tolerance for controversial, perhaps even abusive, behaviors; and antiquated measurement systems and communication networks. At best, the ideal future states of these organizations are fuzzy. The leader’s job becomes increasingly complex but far less well defined during these times of change—itself a frustrating thing.

The Open Organization: Igniting Passion and Performance
by Jim Whitehurst
Published 1 Jun 2015

China's Disruptors: How Alibaba, Xiaomi, Tencent, and Other Companies Are Changing the Rules of Business
by Edward Tse
Published 13 Jul 2015

Kill It With Fire: Manage Aging Computer Systems
by Marianne Bellotti
Published 17 Mar 2021

Drugs Without the Hot Air
by David Nutt
Published 30 May 2012

Perhaps in the future we’ll understand anxiety disorders in a more sophisticated way, and be able to treat them much more effectively. In general, although physical dependence on benzodiazepines is common and withdrawal can sometimes be problematic, the psychological cravings that characterise addiction are extremely rare when benzodiazepines are taken as directed by the doctor. Whether it’s worth risking building up tolerance and possibly suffering withdrawal symptoms, depends on individual factors – especially how ill you are and how much the benzodiazepines help you. The decision requires the same sort of weighing up of the harms and benefits as with any drug. Antidepressants and SSRIs Selective serotonin reuptake inhibitors (SSRIs) were first developed in the 1970s.

The Future of Money: How the Digital Revolution Is Transforming Currencies and Finance
by Eswar S. Prasad
Published 27 Sep 2021

Buffett
by Roger Lowenstein
Published 24 Jul 2013

Risk, to Buffett, was the risk of paying more than a business would prove to be worth. And the range of variables was nearly infinite. Was a company dependent on too few customers? Did the chairman drink? Since the sum (or even the number) of such risks could not be figured with precision, Buffett looked for companies—the very few companies—in which the risks seemed tolerable even allowing for error. The theorists recognized no such nuances; risk, in their view, was measurable. Since stock prices were right, they simply assumed that the foreseeable risks in a business were incorporated in its price. Every change in outlook was immediately matched by a change in price.

The Sociopath Next Door
by Martha Stout
Published 8 Feb 2005

Private Island: Why Britain Now Belongs to Someone Else
by James Meek
Published 18 Aug 2014

The Secret Club That Runs the World: Inside the Fraternity of Commodity Traders
by Kate Kelly
Published 2 Jun 2014

The Introvert Entrepreneur: Amplify Your Strengths and Create Success on Your Own Terms
by Beth Buelow
Published 3 Nov 2015

The War on Normal People: The Truth About America's Disappearing Jobs and Why Universal Basic Income Is Our Future
by Andrew Yang
Published 2 Apr 2018

Alone on the Wall: Alex Honnold and the Ultimate Limits of Adventure
by Alex Honnold and David Roberts
Published 2 Nov 2015

The System: Who Owns the Internet, and How It Owns Us
by James Ball
Published 19 Aug 2020

On Paradise Drive: How We Live Now (And Always Have) in the Future Tense
by David Brooks
Published 2 Jun 2004

The Great Wave: The Era of Radical Disruption and the Rise of the Outsider
by Michiko Kakutani
Published 20 Feb 2024

The Code: Silicon Valley and the Remaking of America
by Margaret O'Mara
Published 8 Jul 2019

“All the losers came here,” a tech veteran once told me in wonderment, “and by some miracle they pulled it off.”8 The geographic and psychic separation between the Valley and the hubs of finance and government—not to mention the ivied halls of East Coast academia—was both its great advantage and its Achilles heel. Innovation blossomed within a small, tightly networked community where friendship and trust increased people’s willingness to take professional risks and tolerate professional failures. Yet the Valley’s tight circle, born in an era when the worlds of engineering and finance were all-white and all-male, programmed in sharp gender and racial imbalances—and narrowed the industry’s field of vision about the products it should make and the customers it could serve.

The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses
by Eric Ries
Published 13 Sep 2011

The Four: How Amazon, Apple, Facebook, and Google Divided and Conquered the World
by Scott Galloway
Published 2 Oct 2017

Automate This: How Algorithms Came to Rule Our World
by Christopher Steiner
Published 29 Aug 2012

The Disciplined Trader: Developing Winning Attitudes
by Mark Douglas
Published 1 Jan 1990

Flash Boys: A Wall Street Revolt
by Michael Lewis
Published 30 Mar 2014

To Pixar and Beyond
by Lawrence Levy

Quit Like a Millionaire: No Gimmicks, Luck, or Trust Fund Required
by Kristy Shen and Bryce Leung
Published 8 Jul 2019

Big Business: A Love Letter to an American Anti-Hero
by Tyler Cowen
Published 8 Apr 2019

Show Me the Bodies: How We Let Grenfell Happen
by Peter Apps
Published 10 Nov 2022

Why geography matters: three challenges facing America : climate change, the rise of China, and global terrorism
by Harm J. De Blij
Published 15 Nov 2007

Time will soften the rough edges of this problem, and already has: two decades ago it was incon- ceivable that Taiwanese investment in China's Pacific Rim economy would even be possible, let alone reach the dimensions it has. An outbreak of armed conflict would be catastrophic for all three parties. Nothing that increases this risk should be tolerated, and Washington must convince Beijing that this must be a joint objective. Over the longer term, China's economic and geopolitical challenge will be more difficult to accommodate, and the American role in East Asia will undoubtedly have to change. China has unresolved issues with Japan ranging from Japan's failure to acknowledge the atrocities it committed in China during its wartime occupation to disputes over islands and waters in the South China Sea.

Bank 3.0: Why Banking Is No Longer Somewhere You Go but Something You Do
by Brett King
Published 26 Dec 2012

As a customer I may very well use the Internet to research my investment options, so before I go to the advisor in the branch, or he comes to see me at my office, I may very well have decided the asset classes I want to invest in, the investment horizon, the level of risk I am prepared to take. I may have gone online and used a risk profile questionnaire to see what level of risk I will tolerate. I may have used websites or magazines on investments to look at whether it is the right time to invest in my local property market, or in blue-chip banking stocks. I may be part of an investment club online; I may even have my own online brokerage account separate from my retail bank. So while I may engage with an advisor in the final stage to execute a transaction, I may have already made the all of the critical decisions long before my meeting with the human advisor.

Food and Fuel: Solutions for the Future
by Andrew Heintzman , Evan Solomon and Eric Schlosser
Published 2 Feb 2009

The Rise of Superman: Decoding the Science of Ultimate Human Performance
by Steven Kotler
Published 4 Mar 2014

The Entrepreneurial State: Debunking Public vs. Private Sector Myths
by Mariana Mazzucato
Published 1 Jan 2011

The Lucky Years: How to Thrive in the Brave New World of Health
by David B. Agus
Published 29 Dec 2015

AI Superpowers: China, Silicon Valley, and the New World Order
by Kai-Fu Lee
Published 14 Sep 2018

The Water Will Come: Rising Seas, Sinking Cities, and the Remaking of the Civilized World
by Jeff Goodell
Published 23 Oct 2017

More From Less: The Surprising Story of How We Learned to Prosper Using Fewer Resources – and What Happens Next
by Andrew McAfee
Published 30 Sep 2019

Concentrated Investing
by Allen C. Benello
Published 7 Dec 2016

Engineering Security
by Peter Gutmann

This indicates a notable difference between the anti-spam industry and web browsers, in anti-spam the use of multiple factors in deciding whether something is safe or not is the standard way of doing things, to the extent that a mechanism that uses a mere 2 1 to 26 factors qualifies as sufficiently unusual to merit its own conference paper [119], while for browsers the standard is to use 20 factors. The browser can also choose to automatically apply changes in risk tolerance in a situation-specific manner. For example if your laptop normally connects to the Internet through a home wireless network but is now connected through an unrecognised network (corresponding to the Internet cafe that you’re currently sitting in) then the browser can increase the risk-aversion factor so that extra checking is applied to sites before they’re regarded as being safe (this type of location-based adaptive defensive thinking is covered in more detail in the discussion of locationlimited channels in “Use of Familiar Metaphors” on page 497). 320 Design One distinction that you need to make here is the difference between risks and risk.

The Misbehavior of Markets: A Fractal View of Financial Turbulence
by Benoit Mandelbrot and Richard L. Hudson
Published 7 Mar 2006

The Price of Everything: And the Hidden Logic of Value
by Eduardo Porter
Published 4 Jan 2011

Better, Stronger, Faster: The Myth of American Decline . . . And the Rise of a New Economy
by Daniel Gross
Published 7 May 2012

SUPERHUBS: How the Financial Elite and Their Networks Rule Our World
by Sandra Navidi
Published 24 Jan 2017

Schwarzman went on to hire strong partners who brought both their business acumen and networks along with them. According to colleagues and business partners, he is incredibly driven, has an uncompromising work ethic, and is as demanding of others as he is of himself. Blackstone did not merely survive the crisis; it flourished, largely due to Schwarzman’s cautious risk management and low tolerance for mistakes. The government even sought his advice because of his turnaround expertise. Despite occasional tone deafness, Schwarzman’s self-awareness and persuasive sales skills have been instrumental in building an empire and elevating him to superhub status. INQUIRING MINDS High intelligence and academic achievements at top schools are indispensable to becoming a network’s nucleus.

Bold: How to Go Big, Create Wealth and Impact the World
by Peter H. Diamandis and Steven Kotler
Published 3 Feb 2015

Radical Markets: Uprooting Capitalism and Democracy for a Just Society
by Eric Posner and E. Weyl
Published 14 May 2018

Why Aren't They Shouting?: A Banker’s Tale of Change, Computers and Perpetual Crisis
by Kevin Rodgers
Published 13 Jul 2016

Principles: Life and Work
by Ray Dalio
Published 18 Sep 2017

Once we had them, we back-tested them over long time frames, using the systems to simulate how the decision rules would have worked together in the past. We were startled by the results. On paper, this new approach improved our returns by a factor of three to five times per unit of risk, and we could calibrate the amount of return we wanted based on the amount of risk we could tolerate. In other words, we could make a ton more money than the other guys, with a lower risk of being knocked out of the game—as I’d nearly been before. I called it the “killer system” because it would either produce killer results for us and our clients or it would kill us because we were missing something important.

The Age of Em: Work, Love and Life When Robots Rule the Earth
by Robin Hanson
Published 31 Mar 2016

For example, we should expect more industriousness relative to indulgence, a work relative to a leisure orientation, time orientations that are long term relative to short term and that are tied to clocks instead of relationships, low instead of high context attitudes toward rules and communication, and a loose relative to tight attitude on interpreting social norms. For other standard cultural dimensions, productivity considerations don’t as clearly suggest which direction an em world favors. These dimensions include degree of avoidance of risk and uncertainty, tolerance of inequality, individual or group identity, cooperative or competitive emphasis, and high or low emotional expressiveness. Today, about 70% of the variation in values across nations is captured in just two key factors (Inglehart and Welzel 2010). These two factors also capture much of the variation in individual values (Schwartz et al. 2012).

The End of Illness
by David B. Agus
Published 15 Oct 2012

The Space Barons: Elon Musk, Jeff Bezos, and the Quest to Colonize the Cosmos
by Christian Davenport
Published 20 Mar 2018

Billion Dollar Whale: The Man Who Fooled Wall Street, Hollywood, and the World
by Tom Wright and Bradley Hope
Published 17 Sep 2018

Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism
by Kevin Phillips
Published 31 Mar 2008

Leaving Orbit: Notes From the Last Days of American Spaceflight
by Margaret Lazarus Dean
Published 18 May 2015

Dark Towers: Deutsche Bank, Donald Trump, and an Epic Trail of Destruction
by David Enrich
Published 18 Feb 2020

A Mind at Play: How Claude Shannon Invented the Information Age
by Jimmy Soni and Rob Goodman
Published 17 Jul 2017

The Secret Life of Groceries: The Dark Miracle of the American Supermarket
by Benjamin Lorr
Published 14 Jun 2020

The Great Displacement: Climate Change and the Next American Migration
by Jake Bittle
Published 21 Feb 2023

The Firm
by Duff McDonald
Published 1 Jun 2014

Especially from the perspective of the client, who might have a year-long project to contend with? McKinsey has long been enamored with the way it does things—going so far as to tell clients they can take the culture or leave it—but in an era of cautious corporate spending, McKinsey’s idiosyncrasies run the risk of not being tolerated anymore. McKinsey will tell you that there really is no secret to its success—it is based on a relentless focus on recruiting and training, rigorous peer review, hard work, and emphasizing one’s contributions to the firm rather than taking credit for client billings. The firm’s recruiting process has been compared to that for astronauts.

Inviting Disaster
by James R. Chiles
Published 7 Jul 2008

Is that kind of advance planning proof that high-reliability organizations have really arrived? Or would it make any difference for the complex and interactive system that Charles Perrow worries about? For myself, I make no arguments that anything can be made perfectly safe, nor do I know what “safe enough” means. In a national emergency the American public eagerly puts up with risks they’d never tolerate otherwise. Put me down as one who thinks we’ll have to settle for systems that have problems on a regular basis. If the systems are resilient and the workers have support from the top, problems will likely stop well short of disaster—most of the time. But where the consequences are irreversible and final, such as an accidental nuclear war, like Scott Sagan I find it hard to believe that we’ll be able to keep our collective finger on this hair trigger indefinitely without twitching even once.

Factory Girls: From Village to City in a Changing China
by Leslie T. Chang
Published 6 Oct 2008

What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences
by Steven G. Mandis
Published 9 Sep 2013

The Innovation Illusion: How So Little Is Created by So Many Working So Hard
by Fredrik Erixon and Bjorn Weigel
Published 3 Oct 2016

At least some have woken up to the fact that the old dinosaur theory of innovation does not stand up – and that incumbents instead face growing innovation costs. African innovator and entrepreneur Bright Simons made an apt summary in the Harvard Business Review of the new landscape of innovation: “Technical complexity, social risk management (including lower tolerance for unintended consequences), diminishing returns, and talent challenges have all combined to raise the cost threshold of breakthrough innovation, even as downstream the costs of proliferation – reproducing, replicating, diffusing, disseminating, and indeed hacking innovation – have decreased.”71 Big companies know this by heart.

The Lords of Easy Money: How the Federal Reserve Broke the American Economy
by Christopher Leonard
Published 11 Jan 2022

Lost Connections: Uncovering the Real Causes of Depression – and the Unexpected Solutions
by Johann Hari
Published 1 Jan 2018

The Coddling of the American Mind: How Good Intentions and Bad Ideas Are Setting Up a Generation for Failure
by Greg Lukianoff and Jonathan Haidt
Published 14 Jun 2018

Financial Freedom: A Proven Path to All the Money You Will Ever Need
by Grant Sabatier
Published 5 Feb 2019

Whether you live in the city or the country, there are always deals to be found. While it might seem daunting at first, real estate investing, like stock investing, isn’t that complicated. But also, just like stock investing, you should invest only in what you understand and take only as much risk as you can tolerate. The more you know about the market and the neighborhoods, the better an investor you will be. You can either get this market knowledge yourself by keeping an eye on prices online and looking at properties in your target neighborhoods, or you can outsource it and work with a Realtor who knows the neighborhoods and scouts deals for you.

Apollo's Arrow: The Profound and Enduring Impact of Coronavirus on the Way We Live
by Nicholas A. Christakis
Published 27 Oct 2020

Shadow Libraries: Access to Knowledge in Global Higher Education
by Joe Karaganis
Published 3 May 2018

Valley of Genius: The Uncensored History of Silicon Valley (As Told by the Hackers, Founders, and Freaks Who Made It Boom)
by Adam Fisher
Published 9 Jul 2018

How Markets Fail: The Logic of Economic Calamities
by John Cassidy
Published 10 Nov 2009

King of Capital: The Remarkable Rise, Fall, and Rise Again of Steve Schwarzman and Blackstone
by David Carey
Published 7 Feb 2012

Making Globalization Work
by Joseph E. Stiglitz
Published 16 Sep 2006

The Contrarian: Peter Thiel and Silicon Valley's Pursuit of Power
by Max Chafkin
Published 14 Sep 2021

Masters of Management: How the Business Gurus and Their Ideas Have Changed the World—for Better and for Worse
by Adrian Wooldridge
Published 29 Nov 2011

It's Not TV: The Spectacular Rise, Revolution, and Future of HBO
by Felix Gillette and John Koblin
Published 1 Nov 2022

The mote in God's eye
by Larry Niven; Jerry Pournelle
Published 30 Jan 2011

"You are a Master but you are not my Master." "Obey," said Ivan. Ivan was not good at argument. Charlie was. As Jock twitched and stammered in internal conflict, Charlie switched to an ancient, half-forgotten language, less for concealment than to remind Jock how much they had to conceal. "If we had many Mediators the risk would be tolerable; but if you should go mad now, policy would be decided by Ivan and me alone, Your Master would not be represented." "But the dangers that threaten our world-" "Consider the record of your sisters. Sally Fowler's Mediator now goes about telling Masters that the world could be made perfect if they would exercise restraint in their breeding.

The Power Law: Venture Capital and the Making of the New Future
by Sebastian Mallaby
Published 1 Feb 2022

“Now it’s a matter of weeks or even days, because if we don’t somebody else will.”[15] But whatever the risks in this frenetic scramble, the new atmosphere was a tonic. The surge of venture dollars “helped flush the capable entrepreneurs out of their safe nests in the large corporations and into the gutsy and creative new ventures,” as Bill Draper of Sutter Hill put it.[16] The risk-taking and tolerance of failure, often ascribed to some sort of magical potion in the Silicon Valley water, had everything to do with this fillip. When an engineer named Chuck Geschke quit a secure job to found the software company Adobe, he declared himself untroubled by the prospect of failure. He had watched other entrepreneurs navigate the world of venture-backed startups, and he had seen that failure often meant that you raised more venture dollars the next time.[17] With the feeling of risk drowned out by venture capital, and with so many innovative experiments being funded, some were bound to hit it big.

Challenger: A True Story of Heroism and Disaster on the Edge of Space
by Adam Higginbotham
Published 14 May 2024

And the shuttle was so complex that those at the top of the NASA pyramid like Administrator James Beggs or Marshall Chief Bill Lucas recognized that risk could never be eliminated from the program; it could be calculated and minimized but, by the time the orbiter left the launchpad on each new mission, some residual potential for failure or catastrophe would always remain. It was left to the agency engineers and their contractors to determine how much risk they could tolerate. To do so, NASA had formalized a process by which engineers assessed each component of the shuttle to calculate how likely it was to go wrong, and whether the risk of it doing so was acceptable. If the engineers discovered an outstanding fault in any element of the shuttle, it could not fly until the problem—or “anomaly,” in the bloodless technical jargon they favored—had been understood and corrected, or the project engineers had conducted enough testing to satisfy NASA managers that it wouldn’t threaten the lives of the crew.

Gamers at Work: Stories Behind the Games People Play
by Morgan Ramsay and Peter Molyneux
Published 28 Jul 2011

Wall Street: How It Works And for Whom
by Doug Henwood
Published 30 Aug 1998

The Rights of the People
by David K. Shipler
Published 18 Apr 2011

Anarchy State and Utopia
by Robert Nozick
Published 15 Mar 1974

The Ice at the End of the World: An Epic Journey Into Greenland's Buried Past and Our Perilous Future
by Jon Gertner
Published 10 Jun 2019

Radical Uncertainty: Decision-Making for an Unknowable Future
by Mervyn King and John Kay
Published 5 Mar 2020

The Cryptopians: Idealism, Greed, Lies, and the Making of the First Big Cryptocurrency Craze
by Laura Shin
Published 22 Feb 2022

The Children of the Sky
by Vernor Vinge
Published 11 Oct 2011

On the other hand, Oobii does have an enormous amount of information about coldsleep implementations. If you could devise a search list that uses what you see in the casket manuals and properly feed that to Oobii.…” “You’d really help? Even after…?” Ravna nodded. “One important decision you have to make is what level of medical risk you will tolerate.” Her gaze drifted almost involuntarily to where Timor sat on the other side of the room. “Oh.” Then Øvin seemed to follow her gaze. “Oh!… I remember risk was one of the reasons you wanted to postpone this kind of work.” He watched Timor Ristling for a few moments. Timor had set his workstation display to large, perhaps so it would be easier for Belle to follow what he was doing.

Dereliction of Duty: Johnson, McNamara, the Joint Chiefs of Staff, and the Lies That Led to Vietnam
by H. R. McMaster
Published 7 May 1998

New Market Wizards: Conversations With America's Top Traders
by Jack D. Schwager
Published 28 Jan 1994

The Bankers' New Clothes: What's Wrong With Banking and What to Do About It
by Anat Admati and Martin Hellwig
Published 15 Feb 2013

The Billionaire's Apprentice: The Rise of the Indian-American Elite and the Fall of the Galleon Hedge Fund
by Anita Raghavan
Published 4 Jun 2013

When the Heavens Went on Sale: The Misfits and Geniuses Racing to Put Space Within Reach
by Ashlee Vance
Published 8 May 2023

In the Plex: How Google Thinks, Works, and Shapes Our Lives
by Steven Levy
Published 12 Apr 2011

The mystery was why no one at Google noticed that Street View servers were loaded with gigabytes of data that had no business being there. In any case, collecting the information was a potential violation of data security laws, and the transgression triggered investigations in several countries and states. The incident exposed the risks that arise when tolerance of a company’s information retention policies is at the limit. Even its tiniest mistakes called attention to the larger truth—that Google had a frightening amount of information under its control. And when something major went wrong, like the Street View Wi-Fi debacle, it eroded Google’s main line of defense when justifying its stewardship of the world’s information: trust.

The Practice of Cloud System Administration: DevOps and SRE Practices for Web Services, Volume 2
by Thomas A. Limoncelli , Strata R. Chalup and Christina J. Hogan
Published 27 Aug 2014

The Price of Time: The Real Story of Interest
by Edward Chancellor
Published 15 Aug 2022

The Making of Global Capitalism
by Leo Panitch and Sam Gindin
Published 8 Oct 2012

By the 1980s and 1990s the greater mobility of financial capital across sectors, space, and time (especially via derivatives)—that is, financial capital’s quality as general or “abstract” capital—greatly intensified domestic and international competition at the same time as it brought a much greater degree of financial volatility. Thus, while the phenomenal growth of financial markets since the 1980s led to over-leveraging and excessive risk-taking, this was tolerated and in fact encouraged for reasons that went far beyond the competitive dynamics and power of finance itself. It was accepted because financial markets had become so crucial to the domestic and global expansion of capitalism in general. Despite the sheer tenacity of the view, going back to the theories of imperialism a century earlier, that overaccumulation is the source of all capitalist crises, the crisis that erupted in the US in 2007 was not caused by a profit squeeze or collapse of investment due to general overaccumulation in the economy.54 In the US, in particular, profits and investments had recovered strongly since the early 1980s.

Rationality: From AI to Zombies
by Eliezer Yudkowsky
Published 11 Mar 2015

And I understood then that even if you constructed an argument showing that something was the best course of action, Nature was still allowed to say “So what?” and kill you. I looked back and saw that I had claimed to take into account the risk of a fundamental mistake, that I had argued reasons to tolerate the risk of proceeding in the absence of full knowledge. And I saw that the risk I wanted to tolerate would have killed me. And I saw that this possibility had never been really real to me. And I saw that even if you had wise and excellent arguments for taking a risk, the risk was still allowed to go ahead and kill you. Actually kill you. For it is only the action that matters, and not the reasons for doing anything.

Too big to fail: the inside story of how Wall Street and Washington fought to save the financial system from crisis--and themselves
by Andrew Ross Sorkin
Published 15 Oct 2009

The Blank Slate: The Modern Denial of Human Nature
by Steven Pinker
Published 1 Jan 2002

In this case, the tradeoff is between minimizing child abuse while stigmatizing stepparents, on one hand, and being maximally fair to stepparents while tolerating an increase in child abuse, on the other.15 If we did not know that people are predisposed to lose patience with stepchildren faster than with biological children, we would implicitly choose one end of this tradeoff—ignoring stepparenting as a risk factor altogether, and tolerating the extra cases of child abuse—without even realizing it. An understanding of human nature with all its weaknesses can enrich not just our policies but our personal lives. Families with stepchildren tend to be less happy and more fragile than families with biological children, largely because of tensions over how much time, patience, and money the stepparents should expend.

The Portable Atheist: Essential Readings for the Nonbeliever
by Christopher Hitchens
Published 14 Jun 2007

And whereas taking a leap of faith and acting without further scrutiny of one’s options is often celebrated by religions, it is considered a grave sin in medicine. A doctor whose devout faith in his personal revelations about how to treat aortic aneurysm led him to engage in untested trials with human patients would be severely reprimanded if not driven out of medicine altogether. There are exceptions, of course. A few swashbuckling, risk-taking pioneers are tolerated and (if they prove to be right) eventually honored, but they can exist only as rare exceptions to the ideal of the methodical investigator who scrupulously rules out alternative theories before putting his own into practice. Good intentions and inspiration are simply not enough. In other words, whereas religions may serve a benign purpose by letting many people feel comfortable with the level of morality they themselves can attain, no religion holds its members to the high standards of moral responsibility that the secular world of science and medicine does!

Total Recall: My Unbelievably True Life Story
by Arnold Schwarzenegger and Peter Petre
Published 30 Sep 2012

To Sleep in a Sea of Stars
by Christopher Paolini
Published 14 Sep 2020

I’m giving you a direct order. Change our goddamn course.” “Never I will. Never I might.” The captain slapped the console in front of him. “Seriously? You didn’t object when we went off to Bughunt, but you’re going to mutiny now?” “The expectation of peril thereat was not a certainty. Calculated risks remained within reasonable tolerances given available information. You were not setting forth to plunge yourself into the midst of martial turmoil, and I won’t allow it now. No, I won’t.” The ship mind sounded insufferably self-righteous. “Why?” asked Nielsen. “What is it you’re so afraid of?” The ship mind’s unhinged giggle returned.

Stigum's Money Market, 4E
by Marcia Stigum and Anthony Crescenzi
Published 9 Feb 2007

In a money market or other fixed-income portfolio, these risks can be defined by portfolio duration, average maturity, convexity, foreign-exchange exposure, or credit ratings, for example. In a large organization, risk exposures will reside in many layers of the bank, making it necessary for asset-liability managers to track the cumulative amount of risk being taken by the bank, particularly as it relates to the total amount or risk the bank will tolerate. For example, if the bank’s foreign-exchange trading operation is exceeding its risk limit, that added risk reduces the amount of risk that other areas of the bank can take—that is, if the bank wants to allow the foreign-exchange department to take the added risk in this instance and for overall risks to stay within the confines of the risks that the bank previously dictated it should take.