Just started reading the Elon Musk biography and am feeling inspired. In case you don’t know of him: Musk started and sold Zip2 and then PayPal, then started Tesla, SpaceX, and SolarCity.

The latter three ventures push the boundaries of what is possible with technology in electric cars, space exploration and renewable energy, respectively.

From a financial perspective, at first blush, it’s hard to see what Musk is doing. After all, there are many, many opportunities that would require much less capital and have a higher chance of success.

One explanation for Musk’s choice to work on capital intensive, difficult problems is that he’s not primarily money-motivated. The theory is that Musk has always cared about alternative energy and space exploration and that he’s just following his passions.

But I want to posit another motivation: The guy may just have a very good understanding of expected value.

Expected value is a pretty easy concept to understand. In it’s most basic form, the expected value of a strategy is just the chance it succeeds multiplied by the upside if it does. So, for example: the expected value of a coin flip where you get $1MM if heads comes up is 50% x $1MM = $500k.

My theory is that Musk is willing to accept opportunities that have the following characteristics: Low probability of success but extraordinarily high upside, leading to high expected value. So, he’ll take a 10% chance of making $200B (a $20B expected value) over a 30% chance of making $10B (a $3B expected value).

For most people, the marginal utility of the incremental $17B is low. They’d much rather take the “surer” $3B. But Musk is risk tolerant and rational, so he swings for the fences.

But there’s something else going on, too. The very fact that Musk’s target markets are “risky” means fewer companies enter them. That means less competition and, paradoxically, a greater chance of success.

As you know, I’m in a highly competitive field where the chances of success are high (if you’re smart, honest and work hard) but the rewards of success are comparatively small. I’m inspired by Musk to think about adjacent opportunities where the equation might be a bit different.