Take a Calculated Risk Today
18/2/22
Are you “risk averse”? When considering doing something that entails some degree of risk or uncertainty, do you dwell on fantasies about all the potentially catastrophic things that could happen? Does this cause you to hesitate to do things, or even prevent you from acting at all? Do you realise you are probably exaggerating, but feel too much fear to do anything about it? If your answer is “yes”, then I am writing this for you.
The truth is, because life is inherently risky, we can’t even live without taking some risks. Should we get out of bed in the morning? Something bad might happen. Should we stay in bed all day? That too presents some risks. You could even say that it is dangerous to try to avoid all risks. Risk avoidance is risky. Even if you agree with that, you know it doesn’t necessarily help. Despite this clever paradox, many of us, because of fear, still avoid doing things that we really ought to do, and usually for ourselves.
So, the question is not simply how to avoid risks. The question we really should ask is which risks ought we to take and which ones should we avoid? This is why I’m using the term “calculated risks”. We need a way to sort this out.
As this question can be overwhelming, I want to provide a “map” for thinking about it. I propose the following few important reference points and also the different ways they can configure themselves in our thinking.
- Risk
- Reward
- Significance
- Probability
- Uncertainty
Risk refers to the potential negative outcomes of any action we might take. Reward refers to the potential benefits that might follow. Significance is about how important or impactful an outcome might be, whether negative or positive. Probability is our estimation of how likely it is that either negative or positive outcomes will occur. Uncertainty is simply acknowledging and accepting that no matter how extensive our calculations, things are likely to happen that we couldn’t predict. It is a calculated risk, not a fail-safe plan with a guaranteed outcome. The best we can do is play the odds. But we CAN do this wisely.
So, if we take these reference points and put them in different combination, we can see a variety of possibilities.
- High risk- low reward probability
- Low risk- high reward probability
- Low risk- low reward probability
- High risk- high reward probability
Just to. be clear, while this simplifies things a bit, it should be understood that “high” and “low” probabilities represent a continuum. We could put it on a scale of 1 to 10. At the bottom of the scale, although possible, an outcome would be very unlikely. This then would increase by degrees, until we reached a very high probability at the top of the scale.
If doing something entailed a very low probability of a negative outcome and a very high probability of a positive outcome, it just might be a good idea. Conversely, if the probability is high for risk and low for reward, it’s probably a bad idea. Of course, it gets more complicated and harder to decide if the numbers are more like 4-6 instead of 1 or 10.
We could refine our thinking even further by considering not only how likely a risk or reward might be, but how significant it would be. Would it really matter if those things actually happened? The high probability of a negative outcome shouldn’t deter us, if it really wouldn’t matter much. We might have to think about this, as sometimes we exaggerate the significance of a negative outcome. Maybe we could even bear it if it was a moderately significant negative outcome. Just like with probability, we could scale significance from 1-10. The high probability of a significant risk, coupled with the low probability of an insignificant reward ought to justify our aversion to taking the risk. These are the “no brainers”. What about things that we have calculated to entail low probability and insignificant risk coupled with high probability and significant reward? These are the things we do without thinking. Another no brainer. Occasionally, however, we discover too late that our behaviour was riskier than we thought. Think of things like taking prescription medications without first finding out about their side effects.
I don’t think it is necessary for me to cover every possible combination. Hopefully, you get the point. Every risk that we consider taking involves these different factors. Instead of just imagining all the horrors of our “what if” thinking, we could think it through more thoroughly by calculating the probability and significance of both risks and rewards. Then weigh them up against each other. Obviously, our interest is in avoiding risks and enjoying rewards. The problem, and our challenge, is that most significant rewards require taking significant risks. Hey, that’s life. How do we manage when we are facing a choice that entails a high probability of a significant negative outcome, but an equal probability of an even more significant reward. That’s a tough one. It might be worth it. It might not.
I have already mentioned it, but it is important to acknowledge and accept that we can’t know everything and there is a possibility our calculations will not have considered and anticipated everything that might happen, positive or negative. That is why taking risks requires courage. That doesn’t mean pretending there is no risk or somehow refusing to feel fear. As John Wayne once famously said, “Courage is being scared to death, but saddling up anyway.” I think he has in mind situations where the high probability of significant risk is matched by a greater significant reward, even if the probability of the reward isn’t as great.
I am not here to tell you that to overcome being “risk averse”, you need to throw yourself off every (metaphorical) cliff and just trust that either you will fly or there will be a net. That is naïve. What I do suggest is that you use the reference points I have provided to think things through. Be honest with yourself in your calculations. Is it really probable that everyone will hate you forever if you do that thing? Is a high probability risk really significant? We have a joke in our house, between my wife and I, when we catch ourselves exaggerating possible negative outcomes. We say that either she or I will go to prison and the other will commit suicide. I know, it’s a bit dark, but it makes us laugh and get real.
One way to get started in developing both the wisdom and the courage to take calculated risks is to start small. Take little risks. It doesn’t matter how small. Do something you would have been unlikely to do if you hadn’t deliberately decided to. Don’t be held hostage by your own default risk-avoiding habits. If you are waiting to check out at a store and someone cuts in line, take the risk of pointing this out. Well, unless they look crazy and are brandishing a gun, which ought to alert you that this wouldn’t be a small risk. Being smart and confident about taking risks doesn’t have to mean being reckless. It does mean, to some degree, “feeling the fear and doing it anyway.”
May the slogan “Take a Calculated Risk Today”, whether on a mug or a t-shirt, provide just the reminder you need to grow into the bold and confident person you want and are meant to be. Perhaps while sipping your morning coffee and reading this slogan you could set an intention for a particular risk you could take that day. Might you call a friend you haven’t seen in a while and ask them if they would like to meet? They might say no. But they might say yes.
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All the best,
Michael