Is the Juice Worth the Squeeze?
An idea that is not dangerous is unworthy of being called an idea at all.
Oscar Wilde
We are terrible at processing risk.
We are so bad at it that we need laws to require us to avoid things like texting while driving.
But during the COVID pandemic we learned that even the experts are not good at assessing relative risks.
Because of that experience, we are tempted to ignore any warnings about risky behaviors.
At the same time, we let our fear of some risks cause us to make bad decisions that cause us more harm than the risk we were trying to avoid.
The classic example is flying versus driving.
Flying is much safer, but it feels more dangerous.
So how do we intelligently manage risk?
Here are some things to keep in mind.
Repeatedly taking a life-threatening risk is foolish.
We feel that if a risk is rare, it is safe.
And the more often we take that risk without consequence, the safer we feel.
But there are two problems here.
The chances of something bad happening is only part of the picture.
1. We also must judge the severity of that bad outcome.
If you are gambling at the casino, you can take the risk of losing all the money you budgeted to play blackjack.
But in real life, if the risk is catastrophic, we should avoid that gamble.
2. The more often we engage in life-threatening behavior, for example, the more likely we will pay the ultimate price.
Many small risks add up to a larger risk.
Trying to avoid all risk is foolish.
Risk is unavoidable.
We don’t eliminate risk. We trade one risk for another.
If you are managing your retirement portfolio, you cannot take the risk of losing all your nest egg.
However, if you will retire in 25 years, you cannot afford to invest in completely risk-free vehicles that earn at less than the rate of inflation.
There is another risk we must address.
In our culture, we demonize failure.
We ridicule successful people when they have filed for bankruptcy in the past.
But fear of failure keeps us from achieving what is possible for us.
We live at a time when change is coming at us faster and faster.
Playing it safe is not an option.
What opportunity do you have that you have been reluctant to take because of the fear of failure?
Today is the day to take the first step.
What’s the worst that could happen?
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