This paper examines the role of risk, diversification, and growth in economic development. It argues that early stages of development are slow and subject to considerable randomness due to the presence of indivisible projects and risk-averse behavior. The model shows that the desire to avoid risky investments slows capital accumulation and limits the ability to diversify idiosyncratic risks, leading to uncertainty in growth. The development process is characterized by a lengthy period of "primitive accumulation," followed by take-off and financial deepening, and finally, steady industrial growth. Lucky countries can grow more quickly, while risk-averse economies may become trapped in underdevelopment if they receive a series of unlucky draws. The paper also identifies a source of inefficiency in the decentralized equilibrium: the presence of indivisibilities leads to missing markets, which result in suboptimal industrialization rates. This inefficiency, known as a pecuniary externality, is robust across various market structures. The paper generalizes these results to an open economy, showing that capital flows may increase or reduce the rate of industrialization, depending on the stage of development. The model is based on a simple overlapping generations model with non-altruistic agents. Agents decide how much to save and how much to invest in safe assets, while the rest is invested in risky projects. The model shows that the number of open sectors and the level of capital stock are endogenously determined. The presence of indivisibilities and risk aversion leads to a unique equilibrium path, but with higher risk aversion, multiple equilibria may arise, leading to underdevelopment. The paper also discusses the role of financial markets in economic development, showing that credit markets can facilitate growth by enabling the allocation of funds to the most productive users. The paper highlights the importance of diversification in reducing risk and the role of financial deepening in promoting industrial growth. The results are supported by historical evidence and empirical data, showing that developing countries exhibit higher variability in growth rates than more developed economies. The paper concludes that the development process is influenced by a combination of factors, including risk aversion, capital constraints, and the availability of diversification opportunities.This paper examines the role of risk, diversification, and growth in economic development. It argues that early stages of development are slow and subject to considerable randomness due to the presence of indivisible projects and risk-averse behavior. The model shows that the desire to avoid risky investments slows capital accumulation and limits the ability to diversify idiosyncratic risks, leading to uncertainty in growth. The development process is characterized by a lengthy period of "primitive accumulation," followed by take-off and financial deepening, and finally, steady industrial growth. Lucky countries can grow more quickly, while risk-averse economies may become trapped in underdevelopment if they receive a series of unlucky draws. The paper also identifies a source of inefficiency in the decentralized equilibrium: the presence of indivisibilities leads to missing markets, which result in suboptimal industrialization rates. This inefficiency, known as a pecuniary externality, is robust across various market structures. The paper generalizes these results to an open economy, showing that capital flows may increase or reduce the rate of industrialization, depending on the stage of development. The model is based on a simple overlapping generations model with non-altruistic agents. Agents decide how much to save and how much to invest in safe assets, while the rest is invested in risky projects. The model shows that the number of open sectors and the level of capital stock are endogenously determined. The presence of indivisibilities and risk aversion leads to a unique equilibrium path, but with higher risk aversion, multiple equilibria may arise, leading to underdevelopment. The paper also discusses the role of financial markets in economic development, showing that credit markets can facilitate growth by enabling the allocation of funds to the most productive users. The paper highlights the importance of diversification in reducing risk and the role of financial deepening in promoting industrial growth. The results are supported by historical evidence and empirical data, showing that developing countries exhibit higher variability in growth rates than more developed economies. The paper concludes that the development process is influenced by a combination of factors, including risk aversion, capital constraints, and the availability of diversification opportunities.