Risk and reward

A few months ago, I was in an “Indian gaming facility” in the middle of the New Mexico desert trying to kill a few hours before catching a plane back home. At the casino I played some blackjack at the same table as a man of some local renown named Mike (no names have been changed because he’s not the innocent) who is a high roller by local standards.

As a big money player, Mike was able to get away with behavior that, had it occurred in a Las Vegas casino, would have earned him an escort into a dark alley, a trip to the emergency room or a perhaps even a new toe tag. Mike doesn’t like to lose, and when he did on this particular evening, he threw his cards, yelled at the dealer and intentionally tipped over an ashtray.

Mike acted as if casinos were built to give away money, forgetting that the entire concept of gambling is built on a risk/reward ratio.

While Mike’s behavior was deplorable in any setting, the same mentality has crept into the telecom industry. When shareholders file lawsuits after losing their shirts in the market--and assuming there was no outright fraud at the company--they seem to be ignoring a basic fact of investing. There is always risk.

Warren Buffet, who in the midst of the market crash has climbed back to No. 2 on the Forbes list, is praised for his unwavering dedication to investing only in companies he understands. What’s overlooked is that he has an uncanny ability to measure and mitigate risk.

The RBOCs in their current whining to the FCC about “unfair” pricing of UNE-P seem to have forgotten that when they signed on to support the Telecom Act there was a risk that not everything would be interpreted the way they see it. If they get the jump in pricing that they want, the next step is dropping the element-sharing provision completely before being allowed into long distance.

To those that want the reward without the risk, I have but one piece of advice: Don’t be like Mike.