Risk Transfer

De Montfort Capital, a hedge fund, announced last week that it is planning to de-risk novel-writing.

If your objective is to make a living, one of the riskiest ways to do it is to sit down and write a novel.  You will expend a huge amount of time and effort, but publishing houses won’t talk to you  directly.  You have to go through a literary agent who can pick and choose from hundreds of submissions, taking no risk at all.    Alternatively, you can self-publish, but then you have to get the work printed, marketed and distributed.  Once all those costs are incurred, you may be still be left with a shedful of unsold copies.

De Montfort say they will pay up to ten budding writers a £24k salary to write novels, with the authors apparently “selected by algorithm”; then they will take care of proof-reading, editing, design, publishing and marketing.  The authors just have to sit and write 9-5 and take a salary.  Writers then get 50% of any profits (after all De Montfort’s costs, which include the salary paid to the writer), and when they leave De Montfort, they are contractually barred from publishing with anyone else for two years.

Risk transfer is where you get someone else to take or manage a risk for you, in return for payment.  Risk transfer is usually about insurance where you mitigate a risk by paying a premium, or out-sourcing, where you get someone else to manage a risk, presuming that they are more skilled at it than you are.

The cost of risk transfer has to be balanced against the potential costs of the risk (think about your house or travel insurance), or the potential reward that may be being given up.  These De Montfort writers will get security, but may never realise what they are giving up.

 

Story source:  The Guardian Newspaper

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