Thinking on ROI

Return on Investment (ROI) says things clear from the name. And there is a formula: ROI = (Gain from Investment – Cost of Investment) / Cost of Investment

I was reading Aenigma’s paper, there is a chapter called Store of Value by Any Other Name: Economic Game Theory (page 4), it’s interesting. Alice and Bob play the game of service payment with Bitcoin (BTC), you can see how the incentive works there all the time.

“It’s a good thing we had to pay for mining costs,” Bob says. “Otherwise Alice could have walked away scot-free when I refused to take her BTC for the windows. She would have gotten a free lawn mowing out of the game, and I would have gotten nothing.”

I stopped here and thinking of things happened recently. How do people decide to invest in or play with projects? We may know marketing and investors use ROI for measurement to help with their decision making. Let me bring business partnerships as an example:

Alice sees the relationship with Bob is a long term investment by building a potentially profitable project together. She expects the wealth will grow slow at the very beginning but with big profit margins. She has strong confidence in Bob and doesn’t mind waiting or even share more cost.

Or, Alice would tense of her investment and cares more about the risks, more afraid of losing. So she would nervous with Bob’s activities in a very detail way. In this situation, I would say the partnership follows the project’s benefit. No need to assume anything.

Maybe everything is a business

As in normal relationships, once Bob wants to and decides to love and live with Alice forever, he would all in his life without concern. For him, it’s a decision but not an option, he sees it as his life long investment, which will bring him happiness as well as same wealth (or maybe more, who knows). He believes that a better future will be built on top of two people’s efforts if it goes well.

But things may go wrong. Either Bob is not satisfied with the relationship, or he finds a better investment option — Zoe, a richer woman, who will help Bob with either business relationships or just let Bob live a dreaming life. So it turns out Bob has a much efficient way to reach his expected goal. Then why not? No one can resist the temptation as long as the temptation is attractive enough.

In building business

As the primary goal of every organization is profit, it’s rare to see any organizations pay attention to building communities. I met different ideas: to build community and contribute; or choose a profitable business to go, then build the community by the way, as a community is not a must.

You can see the situation everywhere, that lots of communities activities are done by volunteers and enthusiasts, but not organizations. Unless organizations can earn a profit or other benefit from these events. Such as cash from government and sponsors; projects to invest which may bring them profit in the next step.

It’s a world for human beings

All results made by human beings, who want to create standards only for others. We make temporary decisions by our mood but not analytics. Yes, sometimes we are smart to use analytics to persuade others as well as ourselves.

Situations are complex, hard to say right or wrong, things are never be decided by one clear mind. That’s why polls exist. As it said in a movie (or a novel), it is delusional to let human beings rational.

However, life is just like that hard. Fortunately, we still can imagine, coupled with emotions.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s