are alike responsible. The farmer may find his harvest
ruined by a drought or by a deluge; the coal or the gold,
for the extraction of which you have perhaps set up
an extensive mining plant, may come to an end which
is unexpectedly abrupt. You may put your money
into roller-skating rinks and find that cinemas have
become the rage with the fickle public; sometimes
"the market" may decline for causes which remain
obscure but with consequences which are disagreeably
plain. But while risk is always present in some degree,
the degree varies enormously from one industry to
another. Now, it is obvious enough that in an excep-
tionally risky industry, where there is a considerable
possibility that the capital invested will yield no return
at all, the profits of those concerns which succeed
are likely to exceed the rate of interest on gilt-edged
securities. But what is likely to be the magnitude of
this excess? Is risk-taking rewarded if there is any such
excess, however small? Or will it suffice that the gains
and losses should average out to a fair rate of interest
over the whole industry? To enable us to think closely
let us suppose for a moment that we can measure
accurately what the chances are.

Suppose, then, that there were a precisely equal
chance of success on the one hand and failure on the
other in any enterprise, failure involving a complete
loss of all the capital invested. Suppose, further,
6 per cent to be at the time a fair return on a perfectly
secure investment. What would be the return which
must be expected from the risky enterprise, in the
event of its succeeding, before it will be undertaken?
The reader may be tempted to answer, 12 per cent.

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