Posted by: thebylog | November 9, 2005

Maximizing Profit and Minimizing Risk

There’s a conservative ethic in the circles from which I come about insurance, how it’s wrong (at least if it’s not illegal) because it is an evidence of a lack of trust in God to provide. This may be a gross simplification, but I’m pretty sure there are those that hold roughly this view.

In my last Operations Research colloquium class, I got to thinking as the professor was going on about maximizing payoffs and minimizing risk. I wonder if there is an intrinsic difference between trying to maximize the profits of your business and trying to minimize the risk of losing your shirt as a result of a disaster of personal proportions (say a child contracts a disease, the treatment of which requires all the money you have).

In business, these objectives (maximizing payoff, minimizing risk) run side by side like two world-class sprinters leaning for the tape at the end of the race.

I wonder, at their essence, if there is any difference.

Advertisements

Responses

  1. (My opinion is that) they are both good financial practice. When properly pursued, they will integrate elements of trusting God and shouldering responsibility. The former should not be disconnected from the latter.

    Some would say health insurance (unlike maximizing payoffs?) is gambling because you don’t know if it will be needed/because you are getting money you didn’t work for. However, buying a fire extinguisher is like gambling because you never know if there will be a fire; having the church pay for a hospital bill is like gambling because you didn’t work for the money… and I guess maximizing business profits involves an initial lay-out of money with uncertain returns, too.

    -Conservative Mennonite

  2. Having insurance is spreading risk among the secular community. Not having insurance is spreading risk among the religious community. Any difference?


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Categories

%d bloggers like this: