Inequality and Lotteries

There has been much talk about how unacceptable the degree of financial inequality that there is in the US.  And it seems to be getting worse and worse.

But what we have seems to be exactly what most people want in general.  Probably the only part of it that most people would change is the part where they personally are not one of the fortunate wealthy few.

The lottery is the perfect example of a mechanism to achieve an unequal society.

Everyone buys a ticket for a small amount of money.  The jackpot grows until it reaches $301 million.  The winner is drawn.  The result is one rich person with $301M and everyone else goes back to their regular life and stops dreaming about becoming that one rich person – for a week at least.

If that happens several times a year and everyone is either a winner or has a low to moderate job, then a vastly unequal society develops.

After one year, there will be 3 – 4 multi-millionaires and the entire rest of the population will have wealth that is a tiny fraction of those ultra rich.  After a decade, the ranks of the ultra rich will have grown to 30 or 40.  At that point, the top .000001% of the population will have .03% of the total wealth.

Each year, the country will grow more and more unequal, with a tiny fraction of the population commanding an ever growing proportion of the total wealth.

But that is why there is no uprising against the super rich.  Everyone else believes that they might one day hit the lottery and win their position in that group.  And when that happens, they do not want a tax regime, for instance, that will just take their riches away.

 

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Supporting Success with Risk Management

Risk Management is often seen as the Business Prevention Department and the Chief Risk Officer as the Wizard of NO.

But in some ways that can be seen as a glass half full, half empty sort of thing.

A major and sometimes neglected aspect of risk management relates to dealing with the planning for and execution of major changes.  We call this CHANGE RISK MANAGEMENT.

If we think of the Control Cycle as the major manifestation of risk management, Change Risk Management is the special process that is followed to make sure that important new things get on to the Control Cycle without stumbling.

Many times, these changes are the future of the company.  They are the new products, new distribution systems, new territories and acquisitions that will change the course of the company’s path forward.

The Change Risk management process can be performed as Business Prevention or it can be a support to the success of the company.  A good Change Risk Management process will help to identify the ways that the new activity might fail or might harm the firm.  If the Change Risk Management process is designed properly, the Risk Management inputs of that sort can be brought into the process in plenty of time to correct the problems that cause the concerns.  In that sense, fixing those problems adds to the potential success of the company.

But if Risk Management is brought very late to the process, many people have become invested in the change as it is currently planned and any input from risk management that something might go wrong is seen as an attempt to scuttle the project.

So timing and attitude are the two things that make the Change Risk Management process something that supports the success of the company.