Why has Communism failed everywhere ? A chance for commies to explain

[Kidlicious]

Originally posted by Flubber



Kid are you still talking about insurance premiums ?? They are irrelevant to a risk assessment. The only risk a businessman care about are those that cannot be insured.

Also when we do a new project, we buy ZERO new insurance. . .. why? Because existing policies cover ongoing and NEW activities. We will probably drill 1000 new wells this year-- do you think we insure them separately??

Complete crap. If a busines didn't care about risk they would never pay for insurance. The fact that they do means that they see a cost of risk, and want to avoid it. Costs are paid for one way or another. If you don't pay for insurance you still have the risk cost.

[Kidlicious]

Originally posted by Flubber


Arts in polisci and business
Law
MBA 3/4 done

so what?
Do we take out rulers next?

Right is right and wrong is wrong regardless of the degrees behind it

Economics and accounting are more appropriate for what we are talking about perhaps, but I will do you a favor and find something. You have to appreciate it though.

[Kidlicious]

Flubber,

You know that a risk premium is the premium paid to someone for taking your risk, right?

[Kontiki]

Originally posted by Kidicious
Flubber,

You know that a risk premium is the premium paid to someone for taking your risk, right?

Wrong. It's the premium paid to someone for taking your risk IF THE INVESTMENT PAYS OFF. If the risk premium is 20% and the project is a complete failure, the investor does not get 20%.

[Kidlicious]

Originally posted by Kontiki


Wrong. It's the premium paid to someone for taking your risk IF THE INVESTMENT PAYS OFF. If the risk premium is 20% and the project is a complete failure, the investor does not get 20%.

What are you talking about? When you buy insurance the insurance pays for the loss that is insured. You violate rationality assumption by claiming that someone would pay for something that isn't a cost or something that they don't get a benefit from.

[Kidlicious]

Let me ask this to try to save me some time.

What is the cost of not buying insurance?

[Kontiki]

Originally posted by Kidicious


What are you talking about? When you buy insurance the insurance pays for the loss that is insured. You violate rationality assumption by claiming that someone would pay for something that isn't a cost or something that they don't get a benefit from.

You know absolutely nothing about finance or business, do you? As Flubber has repetedly stated, and now I have, THERE IS NO INSURANCE FOR CERTAIN THINGS. If a project fails as I laid out above, where's the insurance? What happened to the 20% risk premium? Where's the investor's compenstation?

[Kidlicious]

Originally posted by Kontiki


You know absolutely nothing about finance or business, do you? As Flubber has repetedly stated, and now I have, THERE IS NO INSURANCE FOR CERTAIN THINGS. If a project fails as I laid out above, where's the insurance? What happened to the 20% risk premium? Where's the investor's compenstation?

Did I say there has to be insurance? No I didn't. I'm just trying to help you understand, and save myself some time. Insurance is an agreement to take on the cost of risk for consideration. If you don't have insurance then you keep the risk cost. You still consider that risk when you make you pricing decision. If you don't then you won't be in business long. If you don't think there is any chance of your buildings being destroyed by fire and you price according to only other costs, then your price is too low, because you are a silly polytubby incapabale of recognizing costs.

[Kontiki]

Wow. Just wow.

One more time, really slowly:

If there is a 5% chance the investor could lose his $100 million investment, what is the insurance?

[Kidlicious]

Originally posted by Kontiki
Wow. Just wow.

One more time, really slowly:

If there is a 5% chance the investor could lose his $100 million investment, what is the insurance?

What the hell is wrong with you? I said there doesn't have to be insurance. Insurance is just an example.

[Kidlicious]

Let me try again to make this very simple for you. Revenue is your benefit. Subtract your costs from that to get your profit. The risk of fire (for example) is calulated and substracted from revenue in the analysis to forcast profit. Either that or you can buy insurance. It really doesn't matter. Risk is not profit.

[Flubber]

Originally posted by Kidicious


Economics and accounting are more appropriate for what we are talking about perhaps, but I will do you a favor and find something. You have to appreciate it though.

Oh plus 10 years working-- including inside a couple of major oil and gas companies where we see the cost benefit analysis stuff regularly. Its actually a big part of legal drafting since if I can get a contract that fixes labour costs that ameliorates that risk. If I can get a long term gas purchase contract, that lessens the risk as well but may also eliminate much of the upside.

You can go look for your article but I accept and acknowledge that insurance costs money. I never disputed that. Do we really need to state the obvious?its just that it is often a fixed cost like all the head office fixed and sunk costs that are not factored in either (except to the extent that there is an "overhead"element.

Its also obvious that risks that are insured are no longer risks of the project. The risks to the project relate to the probabilities of various financial outcomes. Since a company can invest and get a 99.999% chance of say, a 6 % return, obviously they want something more for a riskier investment. In this analysis "risk" is NOT a cost. It is a broader concept.


If you want to talk about insurance premiums, call them that.

[Flubber]

Originally posted by Kidicious
Let me try again to make this very simple for you. Revenue is your benefit. Subtract your costs from that to get your profit. The risk of fire (for example) is calulated and substracted from revenue in the analysis to forcast profit. Either that or you can buy insurance. It really doesn't matter. Risk is not profit.

No risk is not profit nor is it a cost. Insurance premiums are a cost but as I have explained repeatedly, most of the time you pay no ADDITIONAL premium when you do a new project . If there is one, its a cost just like rent or wages or materials or anything else. So how does this become a big factor in determining whether a capitalist does a project or not?


Bottom line-- a capitalist does a risk weighted assessment of costs and revenues to assess a project. If you think insurance premiums have anything to do with this process, I can only laugh .

[Kidlicious]

Originally posted by Flubber


Oh plus 10 years working-- including inside a couple of major oil and gas companies where we see the cost benefit analysis stuff regularly. Its actually a big part of legal drafting since if I can get a contract that fixes labour costs that ameliorates that risk. If I can get a long term gas purchase contract, that lessens the risk as well but may also eliminate much of the upside.

You can go look for your article but I accept and acknowledge that insurance costs money. I never disputed that. Do we really need to state the obvious?its just that it is often a fixed cost like all the head office fixed and sunk costs that are not factored in either (except to the extent that there is an "overhead"element.

Its also obvious that risks that are insured are no longer risks of the project. The risks to the project relate to the probabilities of various financial outcomes. Since a company can invest and get a 99.999% chance of say, a 6 % return, obviously they want something more for a riskier investment. In this analysis "risk" is NOT a cost. It is a broader concept.


If you want to talk about insurance premiums, call them that.

None of this supports your argument that risk is not a cost. If you already have insurance, then sure the cost is fixed, but when you decide on your price you either calculate your risk or you calculate the insurance that you have. Whether you count it as OH or not is irrelevent.

[Kidlicious]

Originally posted by Flubber



No risk is not profit nor is it a cost. Insurance premiums are a cost but as I have explained repeatedly, most of the time you pay no ADDITIONAL premium when you do a new project . If there is one, its a cost just like rent or wages or materials or anything else. So how does this become a big factor in determining whether a capitalist does a project or not?


Bottom line-- a capitalist does a risk weighted assessment of costs and revenues to assess a project. If you think insurance premiums have anything to do with this process, I can only laugh .

The fact is that companies buy insurance. They do so because they have a cost that they want to avoid. If you have 10 years of experience and don't understand that then there are no websites for you to look at. You are too silly to bother with.