Thursday, March 11, 2010

There is no such thing as a free lunch

Reading Malcolm Gladwell's "Blink" and "The Tipping Point" has completely changed my way of thinking.  I've begun to analyze everything going on around me in the context of economic/risk theory.  My latest kick has been recognizing the idea of trade-off and risk free profit, most specifically in the field of education.

For some background, you need to be aware that there is no such thing as a risk-free profit.  In order to earn money or make some type of gain (capital or not), you must assume the risk that is associated with that gain.  Big gains often carry the greatest risk, while small gains do not carry such a large risk.  There are ZERO situations that involve a huge gain with no risk or payoff, and it should be obvious as to why.

With that being said, we tend to ask for things of the utmost quality at no cost to us...
1.  Taxpayers want their elected officials (yes, elected, by them) to be at their beck and call, but don't want to pay taxes. 
2.  Taxpayers want the most exceptional high quality education that can be provided for their children for the same price forever
3.  Teachers want to do great things in the classroom, but may not want to put in the incredible amont of time required to develop a good lesson (also could be the case that they spend their time grading, rather than creating).
4.  Students want an A for just showing up and doing what they're told, without spending the incredible amount of time it takes to actually learn something.
5.  Everybody wants their medical bills paid for via health insurance, but they don't want to pay an increased cost for it. 

So, the health insurance debate snuck in here and is a pretty interesting risk scenario.  On one hand, you can opt to not have health insurance and pay your own medical bills at the risk of paying an increasingly high amount.  On the other hand, you can opt for health insurance, at the risk of paying higher premiums.  And yes, I do realize that insurance companies can deny coverage, so we don't really "opt" to not have health insurance.  Just consider that an insurance company does the same risk management evaluation when they evaluate you for health insurance.

Hoping I can get some student commentary, examples, feedback about risk free profit,
-Mr. C


dr.Brett said...

"You have to spend money to make money"


Christiansen said...

Wow, that has never been more appropriate.