Advertisement

The Risk Bearer

Reducing Uncertainty
  • Marina Krakovsky

Abstract

Every business person deals with risk, but middlemen are in a unique position to profit from it. To play the Risk Bearer role well, they must understand the workings of risk.

Keywords

Venture Capital Moral Hazard Trading Partner Adverse Selection External Risk 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

Notes

  1. 2.
    Nicolas Kervyn, Susan T. Fiske, and Chris Malone, “Brands As Intentional Agents Framework: How Perceived Intentions and Ability Can Map Brand Perception,” Journal of Consumer Psychology 22, no. 2 (2012): 166–176.CrossRefGoogle Scholar
  2. 3.
    Michael Lewis, Flash Boys: A Wall Street Revolt (New York: Norton, 2014).Google Scholar
  3. 8.
    This insight comes from Jerker Denrell, “Vicarious Learning, Undersampling of Failure, and the Myths of Management,” Organization Science 14, no. 2 (2003): 227–43.CrossRefGoogle Scholar
  4. 10.
    Failure to correct for this bias has been called “selection neglect.” See Jonathan J. Koehler and Molly Mercer, “Selection Neglect in Mutual Fund Advertisements,” Management Science 55, no. 7 (2009): 1107–121.CrossRefGoogle Scholar
  5. 13.
    Theodore C. Bestor, Tsukiji: the Fish Market at the Center of the World (Berkeley: University of California Press, 2004), 257.Google Scholar
  6. 18.
    Kathleen M. Eisenhardt, “Agency- and Institutional-Theory Explanations: The Case of Retail Sales Compensation,” Academy of Management Journal 31, no. 3 (September 1988): 488–511.CrossRefGoogle Scholar
  7. 19.
    For more on this trade-off, see Bengt Holmstrom, “Moral Hazard and Observability,” Bell Journal of Economics 10, no. 1 (Spring 1979): 74–91.CrossRefGoogle Scholar
  8. For a more nuanced view, see Canice Prendergast, “The Tenuous Trade-off Between Risk and Incentives,” Journal of Political Economy 110, no. 5 (October 2002): 1071–102).CrossRefGoogle Scholar
  9. 23.
    John K. Booth, “The Image Crisis and the Actuary: Understanding Public Misunderstanding,” Record of Society of Actuaries 17, no. 4B (1991): 2389–2419Google Scholar
  10. 32.
    Nassim Nicholas Taleb, Antifragile: Things That Gain from Disorder (New York: Random House, 2012).Google Scholar
  11. 34.
    For an overview of power-law distributions and some of the many phenomena governed by them, see M. E.J. Newman, “Power Laws, Pareto Distributions and Zipf’s Law,” Contemporary Physics 46 (2005): 323–51.CrossRefGoogle Scholar
  12. 36.
    Taleb wrote that “In Extremistan, inequalities are such that one single observation can disproportionately impact the aggregate, or the total.” See Nassim Nicholas Taleb, The Black Swan: The Impact of the Highly Improbable (New York: Random House, 2007), 33.Google Scholar
  13. 37.
    Peter Thiel, Zero to One: Notes on Startups, or How to Build the Future (New York: Crown Business, 2014), 86.Google Scholar
  14. 39.
    In the introduction to their book of interviews with 35 top VCs and angel investors (including Maples), Tarang Shah and Sheetal Shah observe that entrepreneurs who had founded successful companies “had a very strong intuition and access to asymmetric information” that enabled them to tap emerging opportunities. See Tarang Shah and Sheetal Shah, Venture Capitalists at Work: How VCs Identify and Build Billion-Dollar Successes (Berkeley: Apress, 2011), xvii.CrossRefGoogle Scholar
  15. 42.
    Adam D. Galinsky, Joe C. Magee, M. Ena Inesi, and Deborah H. Gruenfeld, “Power and Perspectives Not Taken,” Psychological Science 17, no. 12 (2006): 1068–74.CrossRefGoogle Scholar
  16. 43.
    Alison Wood Brooks, Laura Huang, Sarah Wood Kearney, and Fiona E. Murray, “Investors Prefer Entrepreneurial Ventures Pitched by Attractive Men,” Proceedings of the National Academy of Sciences 111, no. 12 (March 2014): 4427–31.CrossRefGoogle Scholar
  17. 45.
    David H. Hsu, “What Do Entrepreneurs Pay for Venture Capital Affiliation?” Journal of Finance 59, no. 4 (August 2004): 1805–844.CrossRefGoogle Scholar
  18. 51.
    Chris Anderson, The Long Tail: Why the Future of Business Is Selling Less of More (New York: Hyperion, 2006), 53.Google Scholar
  19. 52.
    Anita Elberse, Blockbusters: Hit-making, Risk-taking, and the Big Business of Entertainment (New York: Henry Holt, 2003).Google Scholar
  20. 54.
    A brief review of the research appears in Matthew Bidwell and Isabel Fernandez-Mateo, “Three’s a Crowd? Triadic Employment Relationships,” in Peter Capelli (ed.), Employment Relationships: New Models of White Collar Work (New York: Cambridge University Press, 2008), 147.Google Scholar
  21. 57.
    William Feller, An Introduction to Probability Theory and Its Applications, vol. 1, 3rd ed. (New York: Wiley, 1968), 466.Google Scholar

Copyright information

© Marina Krakovsky 2015

Authors and Affiliations

  • Marina Krakovsky

There are no affiliations available

Personalised recommendations