Investing is an almost prototypical risk versus reward activity. The higher the likelihood of things not working out as planned, the larger the share of the profit is demanded in return. Stable financial ventures that have returned a steady profit for decades have no need to pay severe risk premiums compared to other investments. Startups operating out of somebody’s garage must offer much higher payoffs in the event that the ship does come in rather than sink. The investors who risked money on a Microsoft or HP when they were just getting started ended up as zillionaires. The ones who backed their startup competitors likely ended up with an investment loss deduction on their taxes.  (more…)