There is a game mechanic called Risk and Reward. And I was just sitting here thinking about something. I asked this question to my cousin:

"Say you have $20,000 and you want to double it. You spedn $15,000 of it on an investment that promises you double your investment. Let's say that investment does return double. Now you have $35,000. Now you want to triple your money. However, in order to triple your money, you have to risk going in debt $10,000 and being flat broke. I wonder if businesses take risk like this often?"

He responded:

" Every business is like that. Life is like that. If you want something, you take risks. You don't change things by being safe. Apple flopped a lot with garbage tech that made them broke in the 90s, but came out by spending more to make the iPod. Sega put money into stuff.. backed the dreamcast hard and it flopped. They lost all the money. You just have to be smart with what you put your money in."

He went on to say:

"It's not good to buy a cheap camera and have your work suffer by being cheap. Because you will have to buy another one."

I said:

" Right, same way you should maintain a car to keep it running rather than having to buy another one if it fails, unless it is cheaper to buy another car than to maintain the old car."

I already spend my money this way. I buy quality stuff because it holds its value longer. However, I don't make back money because I don't take enough risks. My main thing is that I don't know which risks are good risks.

I have asked a lot of questions on this site about game development and programming, because those are the areas I was lacking in. I don't ask much about 3d modeling, because I know about that. But now I have to consider the business side of the industry.

What is your answer, as it pertains to the business side of the gaming industry, to the question I proposed to my cousin?

The original question seems to distinguish between risking money you have, then risking money you don't have. Both are risks, though perhaps of a different level.

For many examples of business taking a risk, especially large multinationals, the investment may simply come from a large stockpile of cash they have anyway. But for most new startups (unless by someone who already has lots of money), it will involve getting in debt to take a risk.

(On the Dreamcast, I'm not sure I would really call 10 million of anything a flop, even if it wasn't the best seller, indeed I think the first ipod - there is no "the ipod" - was a flop too then, the risk was that they kept pouring money into it and built up sales over the years, where as for Sega it was their last.)