what’re you risking?
We’re always taking risks. You’re taking a risk just by reading this. What are you missing out on by giving this article your attention? More importantly and more usefully (there are an infinite amount of things you’re not doing in any one moment because of the decision you made) is to look at what you’re gaining.
Risks are the only way to make progress in life. They’re also, by definition, the places in life that can set you back. That’s why it’s so important to look at risks more clearly. You can begin to leverage the upside of risk in your favor. Changing your jobs, putting your neck out in support of your ideal, or investing in your business. These are bigger risks. Here are some important keys to risk-taking that every entrepreneur should understand:
- The more risks you take the stronger you become. In The Black Swan Nassim Taleb suggests that the market collapse in 2008 was due to the government trying to “protect” us from natural corrections in certain industries. Forests need to burn once in a while so they can grow back stronger. The internet has made it amazingly easy to test out ideas for almost no-risk and learn from it. Will laid out a three-step process to do just that a couple weeks ago. Don’t take risks for no reason – but don’t get scared away from opportunities!
- Risk arbitrage. Some opportunities scare people off because the risks that go along with them are blown out of proportion. Always ask yourself “what’s the worst that can happen?” and see what the true risk is to you. You can find opportunities with less competition this way because people are scared of them. This is one reason aiming at something bigger than everything else can actually be easier to attain than something average – there aren’t many people with the balls to aim that high.
- Risk is different for everyone. If you have a year’s worth of savings it won’t be as scary to quit your job as if you barely have enough saved up to pay for next week’s rent. This may help you identify arbitrage opportunities. Where can you handle the most risk?
- Risk is easily confused with uncertainty. A key point in The Black Swan is the importance of focusing on the impact of something instead of it’s probability. Look at an opportunity and then consider the impact it could have on your life – best and worst case. Then consider the probability after, but don’t give it too much weight. Remember the biggest opportunities in your life will almost always be the scariest, and therefore will at least feel like the least probable. Don’t get scared away and keep in mind the final point:
- We have a negativity bias. I think it has something to do with our evolution and us surviving sabre tooth tigers… or something. Humans get spooked easily. Our news is full of scared people yelling about how you should be scared too. Workplaces are full of people that don’t want to be there because they are scared to go anywhere else. I’ve missed out meeting beautiful women and fascinating people in my life because I’ve been scared of rejection. I wasn’t weighing the risks and opportunities fairly. Remember that this is something your brain does on default and learn to act into the fear. Don’t let your negativity bias blow up a risk to such a hugely unreal level that you miss life-changing opportunities because of it. It’s often helpful to ask other people for their perspective to get a better reading of the actual risk. Our negativity bias doesn’t often follow us to other people.
What’s the worst that could happen? If you can live with that and you see an opportunity for a better life – take the risk! If you need to ask other people to tame your negativity bias then do it. Take account of the risks your taking now and the risks you could be taking?
What’s the best risk you ever took? The worst? Do you have any rules for risk taking? Leave a comment and let us know!