Return on Impact ( ROI) vs Return on Investment (ROI)?
The higher the risk the higher the return, the business adage goes. Risk is an intangible measure in business, entrepreneurs and business owners are familiar to. Risk is also a profit and loss metric or indicator in business and so that saying goes de nova ‘lose some, win some’. Big tech gurus the likes of Mark Zucks, Jeffrey Bezos, Elon Musk, the Twitter dude his name I can’t recall oh now I remember Jack Dorsey and posthumously Steve Jobs to mention but a few all took the greater risk to invest time, hardwork & cash to create what literally controls our daily lives today i.e social platforms and iOs. Risk, and I mean investment risk is a common dominator and precursor to measuring return on investment (ROI). Often times a good calculation of risks through risk assessment and risk management could increase the return on investment, though not written in stone.
As a startup founder and like any startup founder measuring the return on investment to would be investment, VCs, and angel investors is a business pacifier. A good return on investment usually connoted in percentage % to a business model or business venture is music to investors. Yea we can build a hypothesis here, return on investment is a brainchild of entrepreneurs and/or business owners. However, lets stop and pose this question, is the return on investment equal to the return on Impact? Is return on impact a variable in business canvases?
Enter Elon Musk
Elon Musk the guy who blows up rockets and yea some have made it to orbit is by far the man to cross examine on entrepreneur risk behavior (ERB) say it’s a neuro disease for wealth. Musk I would say is a serial risk entrepreneur and to have this stature you, your entrepreneurial risk behavior must be very high. Clearly a dot.com bubble winner, sold is his fleet of X’s technology companies that led to the creation of PayPal and then PayPal was acquired by eBay. Cool dollars!
What follows in Elon Musk entrepreneurial journey is a case study of the obsessive entrepreneur risk behavior let’s abbreviate it as OERB. Fast forward, Musk begins to orbit his risks to haulage people to the space station and in future to Mars. Mars literally a shell of planet some million miles away, why do we have to even think of going there? Instead we should prioritize to keep our mother Earth safe for the future Gen. However, that’s Musk USP to take his rockets to Mars, form a colony etc. I’m ignoramus to discuss further on quantum physics and cosmology.
In his autobiography written by @Ashlee Vance, it wasn’t until the 6 or 7th test that his ambition to orbit and dock his Falcon 9 at the international Space Station through SpaceX was successful. To the point where he was almost completely broke, the greater risk paid off and today Musk was shortly crowned for a week at least as the richest man in the world, before losing $10 billion that took him back to the second richest man after Jeff Bezos. Anyways, Musk today has contracts with NASA and other governments providing haulage logistics to orbit at a cost cheaper to the power 10. In hindsight, Musk obsessive entrepreneurial risk behavior could be caricaturized as a millionaire throwing millions of spaghetti worth of dollars on the wall. SpaceX, Tesla, and Neurolink stuck on the wall.
Now examining the return on investment the writing is on the wall, Musk is the second richest man on Earth. What’s really is the return on impact with what Elon Musk has created? Return on Impact is multifaceted both tangible & intangible value creation. Today, the economies of scale for space exploration is increasing and driving the cost down to take a shuttle to orbit. This is with SpaceX. But the more return on impact with Musk is with Tesla. And Tesla indeed thanks to the Obama bailout package it is what it is today. Had it not been for the bailout Tesla would be have been just like any electric cars we saw phased out in oblivion.
Measuring the return on impact for Tesla is both social, economic and environmental, the three bottomline. Electric vehicles impact on energy transition and driving down emissions are key and Tesla today as a first mover bosses the automobile EV market. Another return on impact for Tesla is the value proposition for zero fuel costs with many I believe have saved a dollar or two and lastly not least, it’s cool now to drive a Tesla.
Só, to conclude here, where there is a high risk, there is a higher return on investment and a greater return on impact if anchored on on people and planet.
To be continued…