Personal risk and "limited liability"

Finally there's someone smarter than a 5th grader. At the same time that she became the first person to ever win a million dollars on the TV show, she exemplified fruitful risk taking. Interestingly however, she had gallantly decided in advance to donate the money she made towards education programs at Georgia's school, she being their benevolent superintendent or something (need to fact check this). Now you may be wondering how I plan to segue from this into the title of my posting and whether I am chiding her (which I am not). Here it is. I think that if she was playing for keeps, she would have thought much harder than she did about gong for the million dollar question and would have chosen to walk away with the 500K instead (the reward drops to 25K if you get the last one wrong). She made a statement to the effect that she was exemplifying risk taking to the youngsters watching her and was setting an example for them. In fact, I say that had she taken the 500K and walked away, I'd think of her as way way smarter than a 5th grader!

The point I'm trying to make is that it's easier to take bigger risks when you're playing with someone else's money and your personal risk is limited. Remember the guy at Societe Generale who was the prime cause of the emergency Fed funds rate cut in January. Or even better, Brian Hunter, who single handedly forced a big commodity hedge fund to go belly up...apparently this guy is now making big bucks for some other fund. (I want to give an honorary mention to Nick Leeson who brought down Barings Bank....honorary since he did it through really crooked means so that doesn't count for the particular case I'm trying to make).

I extend this analogy to the folks at Freddie and Fanny, Lehman, Bear Stearns and the many mortgage lenders who made a quick buck for themselves and got out relatively scot free, while leaving us the taxpayers to foot the bill. The one solace I find though is in the newsletter from Third Avenue Value Fund in which Whitman (the lead manager) talks about the substantial amount of his own money he's put in, thereby taking a personal hit from the big losses to his shareholders (reminder to self...that does not mean his fund will do well so pull money out of this one as well).

Btw..sorry for one more post with only text. I will try to include a picture or two every now and then to spice things up :)