Life is a series of calculated risks – nothing more. Everything that you decide to do has a margin of risk. No outcome is ever 100 percent certain and, therefore, any attempt at anything has a chance of complete failure. We risk everything, every day of our lives without knowing it. There is always a chance that walking outside will kill us.
There’s a chance that we’ll never make it to our destination, a chance we won’t get to see our loved ones again, a chance that tomorrow will never come. Life is all about risks – you take some and you avoid others.
The life you live depends on the choices you make, the risks you take, and how lucky or unlucky you’ve been. Depending on how lucky you feel you’ll most certainly want to avoid certain risks – like walking across a highway with a blindfold.
There are, likewise, risks that everyone should take in life. Why? Because they are almost always necessary ingredients in the recipe that is happiness.
What is the difference between a calculated risk & an unnecessary chance?
Keep in mind the huge difference between a calculated risk and an unnecessary risk. I’m not talking about risking it all at the casino. I’m talking about entering into a situation in which success is not guaranteed, but careful thought has been put into the decision.
A calculated risk means you have determined the potential costs, and the potential gains, and the potential gains make the action worth the potential costs.
For example, if Fred invests in Stock A for $500, he may lose $500. But Fred has determined that this investment may EARN $4,000. He can afford to lose the $500, so he takes the risk, and invests $500.
If Jim invests in Stock B for $500, he may lose $500. But Jim has determined that this investment may EARN $800. However, Jim cannot really afford to lose the $500, so he does not take the risk.
Calculated risks can also be non-financial. Bill has been dating Mary for a year; he is crazy about Mary. He has decided to ask her to marry him. He believes that, if she says “no”, she will break up with him. But if she says “yes”, she will become his wife. He believes that it is worth the (relatively small) risk that she may break up with him to ask her, because the potential reward — marriage — outweighs the potential risk.
An unnecessary chance means taking a risk without taking steps to minimize that risk. For example, race car drivers wear helmets and fireproof clothing. They are taking a “calculated risk” to race at very high speeds, in hopes of winning the prize money. PART of their “calculation” is that they wear helmets and fireproof clothing. Most drivers would make a different decision if they were not allowed to wear the protective items… and they would NOT race, because that would be taking an unnecessary risk/chance.
Unnecessary risk simply means that someone took a risk that they COULD have avoided. Again, this could be a small risk… like trying to bowl left-handed, or a big risk… like racing without a helmet.
9 Risks you should consider taking.
1. Risk getting turned down.
girl at the bar, any girl at the bar, might turn you down. The same goes for whenever you are asking anything of anyone. More often than not, we get turned down not because of us, but because of the individual that is rejecting our request.
It doesn’t matter whether you are trying to get someone’s number or asking them to pass you a napkin – you’ll always meet that jerk who will refuse to even pay you any attention. Because we hate being rejected – our damn egos at it again – we often fail to even ask.
If you don’t ask then you won’t be answered. If you don’t ask then you’re basically still getting answered no, but you yourself are moving any chance of receiving a yes.
2. Risk not getting the job.
We won’t always be the best qualified. We won’t always be the smartest, brightest or best fit for the job. And there will also be times when we are best suited for the position and we still get turned down.
That’s simply the way life is, but you still need to put yourself on the line and risk being turned down for your dream position. Often times, people get hired simply because they seem hungry and seem like they’ll get along very well with the rest of the team. Experience isn’t always the determining factor. Risking not getting the job is the same as risking actually landing it.
3. Risk failing.
Failing is both the worst and best thing that can happen to you. When you don’t fail, you succeed. When you do fail, you succeed at figuring out another way of not doing it – it just doesn’t feel quite as good.
We too often allow our emotions to get in the way of logic. If you don’t risk failing, then you can’t succeed. Success requires risking failure – that is true 100 percent of the time.
4. Risk putting it all on the line.
If we do things right, there will be a time in our lives that we will have to decide whether or not we want to put it all on the line and roll the dice. My suggestion is to do so and to do so earlier on in life.
The later you risk losing everything, the more difficult it will be to bounce back. The biggest rewards often require the largest risks. Just be smart about it and make sure you know exactly what you are risking and exactly what you would be getting as a reward.
5. Risk that person not saying “I love you too.”
No one wants to be the first one to say “I love you.” I get it – not hearing “I love you” back can suck. But imagine how great it will feel if that person does love you back.
He or she is most likely worrying about the same thing waiting for you to make a move. And if that person doesn’t love you back, then at least you know where things really stand and can disillusion yourself.
6. Risk making a mistake.
Mistakes need to be made if you want to succeed in life – it’s how we learn. If you’re not making mistakes then you’re not trying enough things. In other words, you’re not living enough. Risk making those mistakes because they are the things that make our lives interesting enough to read about.
7. Risk launching too early.
We too often wait until we perfect our product – regardless of whether it’s a physical device or service or our very selves – before we put it on the market. The truth is that no one comes out with the perfect product or service the first time around.
In fact, the perfect anything depends on the feedback that you receive from others. This feedback only comes after several iterations of testing. If you wait too long to launch then you are missing out on critical learning.
8. Risk putting yourself out there and being judged.
We hate being judged regardless of the fact that we do it all the time and that we are being judged all the time. Everyone always judges – it’s what we humans do. Put yourself out there and be judged. Since you’re not selling yourself to everyone – most people won’t be a significant part of your life – most of their opinions don’t really matter anyway.
9. Risk opening up and being vulnerable.
When it comes to relationships, opening up and revealing your full, true self is necessary. It’s a requirement of love I’m afraid. If you don’t open yourself up and make yourself vulnerable then your partner will never see the real you and therefore will never be able to love you for the real you.
You have to risk it all to have it all. You have to risk giving yourself fully to the person whom you love if you want to experience the deepest level of love possible.
Threat vs. Challenge with Risk
The real risk of taking risks is that you might fail. And if you are overly focused on the costs of risk taking, usually driven by fear of failure or feeling pressure to get results, the chances are that you will shift into ‘threat’ mode in which your survival instinct is triggered and you’re driven to protect yourself from that threat. As a result, you become risk averse and you’re not likely to take the risks necessary to perform your best.
You want to see risk taking as a challenge to pursue, not a threat to avoid. With this challenge response, you will be energized, committed, confident, and focused, all of which will help you make those risks pay off in great competitive performances.
So how do we tackle this issue? Use this four steps plan
First remind yourself of the long-term benefits of risk taking so you begin your practices with a positive attitude and a willingness to persist in the face of initial failure. This attitude will help you stay confident and committed as you get accustomed to taking risks.
Secondly, acknowledge and accept that the risks you take may not pay off every time and that you may experience more mistakes and failures that before. You can even see the mistakes as positive experiences because they are evidence that you are, in fact, taking more risks.
Third, make sure you’re totally prepared mentally or physically to take risks. This high state of readiness will increase the chances that your risks will pay off.
Fourth , take a leap of faith. Trust your plan for taking risks. Be consistent and persistent in your efforts to take your game to the next level by taking more risks. And be patient, knowing that it will take some time for your body, mind, technique, and tactics to get accustomed to the plan.
Three Steps for Taking Calculated Risks That Move Your Business Forward
Entrepreneurship and risk go hand in hand. Whether you’re launching your startup or expanding your service offerings, every venture brings the risk of failure.
Instead of taking each decision as it comes, formulate a deliberate risk-evaluation process from the get-go. Every opportunity should drive forward your company’s long-term vision, but there are a few principles that ensure you’re making smart moves when it comes to risk — not blind leaps of faith.
1. Balance your bottom line with innovation.
As a leader, you don’t want to stick to the status quo, but you can’t completely abandon business as usual. This means balancing two competing priorities: maintaining your revenue model and driving innovation. The moment you stop looking for new opportunities, your business risks becoming obsolete.
To identify the best opportunities, you have to understand how your market is evolving. Otherwise, industry changes and profitable opportunities will fly past you, giving your competitors an advantage. Stay on top of change by constantly monitoring your environment, examining other industries’ best practices, staying current on market trends and continually improving yourself. Look for emerging patterns and draw actionable insights from them so you can make informed decisions about where to invest.
2. Evaluate opportunities with a critical eye.
Don’t charge into every opportunity that presents itself. Take a step back to examine the risks involved. Start by gathering as much valuable information as possible. Identify courses of action, and list possible outcomes to weigh your options. This approach will ensure you’re not driven by emotion or held back by fear.
Next, return to your company’s unique value proposition. Does this new product, service or market complement your core competencies? Are you seen as credible in that space? If an extension strays too far from your current offerings, customers may not be willing to buy it from you.
You need to set a reasonable return-on-investment level — not just regarding financial gains, but also in establishing marketplace position. How could this lead to new customers or diversify existing revenue streams, and what timeline is reasonable to realize those returns?
Finally, get feedback from trusted advisers. Walk them through your thought process, asking for help identifying risks you may have overlooked. Gathering feedback from a variety of sources — customers, employees, third-party analysts and even competitors — will allow you to more accurately gauge risk.
3. Say no to saying yes.
As you calculate risks, be prepared to turn down some really good opportunities. If you’re an idea person, saying no can be hard. A trusted consultant said , “If You have so many ideas, but you can’t realistically pursue them all. You have to learn to say no to most of them so you can say yes to the very best.”
Over time, I’ve seen that saying yes to everything would mean going wide but not deep. It’s better (and more profitable) to be an expert in a few areas than to offer shallow knowledge in everything.
The proof that not taking risk is a risk itself
Let’s take an example of a great company who was immensely famous, but suddenly it failed due to not taking risks.
Yes, the company which I am talking about is Nokia. This was the most trusted company for mobile phones, especially the legendary Nokia 3310. This was the bestselling company in 90’s.
But what happened to the company after the smartphone era started. They were offered the android operating system first due to immense popularity by google. What they did? They declined it. They considered microsoft as an operating system which was paid, but the features were far behind theos android. They did not want to make mistakes, so they didn’t took any risks.
Their lumia phones were also of basic type with no additional features as they did not wanted to take risk. As a result thier sales just decreased like hell, soon it became the most underselling company, thier sales decreased almost 90% compared to those of 90’s.
In one of the conference speech the CEO of Nokia said that, “ We didn’t do anything wrong, But somehow we lost, it was our competitors who were strong”.
So where they did mistake? The greatest mistake of nokia was not making mistakes. They didn’t take any risk but thier competitors took the risk, no doubt they failed also, but they learnt from them, and did improvements, and thier corrected risks became success. So this was the greatest mistake done by nokia
But not taking that risk, not doing something that seemed stupid, is what led Nokia to be overtaken by the likes of Apple. Why? Because Nokia was focussing on what people wanted at that point of time, not what they might want in the future. But what people want today may not reflect what they want tomorrow. As Steve Jobs was quoted as saying: “A lot of times, people don’t know what they want until you show it to them.”
That is the crux of the innovator’s dilemma.
So it’s not just about learning, changing, or the pace of change. It’s about taking risks. It’s about doing something that seems to be counter-intuitive and stupid at the point you start, because it seemed then that only a very small group of people would use your product or service. Yet, that “stupid” thing eventually grows into something that takes over the market.
Also After several futile attempts to revive the company’s old appeal, Yahoo has now announced that it is selling most of its core services to US telecommunications giant Verizon. This marks as the end of an era for a company that once defined the Internet. Yahoo was at its most successful in the 90s, but its failure to keep up with the emerging trends contributed to its downfall. The other major factor that caused this fate was a series of missed opportunities by its executives. In 1998, Google’s Larry Page and Sergey Brin had approached Yahoo, with an opportunity to buy its PageRank system for as little as $1 million. The duo wanted to focus on their studies at Stanford, but Yahoo showed no interest as it wanted users to spend more time on its own platform.
Google aka Alphabet is now one of the world’s most valuable companies, with its worth nearing $500 billion. In comparison, the latest deal reveals that Yahoo’s core business was worth just $4.83 billion.
Holy Safety Net! Religion and Recklessness By What Herbert
Moral instruction is a big part of religion. That’s why most faiths come with strict laws of personal conduct. Indeed, many believe that living a sober life, free of risk and excess and recklessness, is evidence of devotion to a higher power.
But most instruction of this sort focuses on recklessness with a moral dimension: Don’t drink too much. Don’t gamble away your family’s security. Don’t let sexual temptations ruin your marriage. Don’t steal someone else’s property. And so forth. These transgressions are considered not only risky, but also wrong.
So what about risk-taking that has no connection to right or wrong? Skydiving, for example, or cycling without a helmet? Does religiosity discourage these high-stakes activities as well?
Not according to a team of Stanford University psychological scientists, who believe that the opposite dynamic may be in play with this kind of risk. Daniella Kupor and her colleagues suggest that belief in God could actually increase the tendency to take certain risks — specifically, risks with no moral overlay. Their reasoning is that God is for most believers a source of security and protection, and feeling safe in God’s care could diminish fear and boost bravery and daring.
The scientists ran a series of experiments to see if priming people with the idea of God makes them feel safe, and if this sense of security in turn makes them more prone to such risk-taking. They used word games and writing exercises to subtly trigger thoughts of a deity for only some of the volunteers. Then they used various measures to assess all the volunteers’ interest in — and propensity to take part in — a variety of moderately risky behaviors, including recreational activities. All the studies provided consistent evidence that reminders of God boost this kind of non-moral risk-taking.
Kupor and her colleagues wanted to compare secular risk-taking directly with moral risk-taking. They also wanted to replicate their preliminary findings in a more naturalistic setting, so they designed a field experiment using Facebook. They ran six advertisements for one day each, but they subtly manipulated the language to prime religious thinking or not. So for example, an ad might say: “God knows what you’re missing! Find skydiving near you.” Or it might leave God out: “You don’t know what you’re missing! Find skydiving near you.” In addition to skydiving, they ran ads for bribery (a clearly immoral behavior) and video gaming, a no-risk control.
They ran a total of more than 450,000 ads on users’ pages, and measured the click-through rate. The results were consistent with their hypothesis. Facebook users primed with the word God clicked more often on the ad for skydiving, but less often on the ad for bribery, compared to when God was not mentioned. The mention of God did not affect their clicking on the neutral gaming ad.
So even a simple, colloquial expression mentioning God boosted interest in non-moral risk-taking. The scientists ran other versions of these studies to clarify the underlying dynamic at work in people’s risk assessments. They found, importantly, that people primed with thoughts of God felt safe from potential harm — and it was this sense of safety that allowed them to take risks. Indeed, reminders of God boosted risk-taking only when God was viewed as a source of protection. And when these people took risks that turned out badly, they reported more negative feelings about God — as if their protector had let them down. The scientists report and discuss these findings in a forthcoming issue of the journal Psychological Science.
References to God pervade daily life. One interesting implication of these findings, the scientists say, is that risk-taking may vary from religion to religion, culture to culture. God the protector may inspire everyday risk-taking, but a punitive God — the “fire and brimstone” God of certain Christian sub-cultures — probably would not, since punitive deities do not offer safety and security.
Why Are Teen Brains Designed for Risk-taking?
In recent years, there has been an increase in the availability of magnetic resonance imaging (MRI) and functional magnetic resonance imaging (fMRI). Using these tools, researchers have found several changes in the brain during puberty (Blakemore, Burnett, & Dahl, 2010; see Blakemore, 2012 for review) that are important in explaining risky behavior.
First, during the adolescence period, there is an increased interest in peer relationships (Larson & Richards, 1991), and susceptibility to peer influence increases during the early teen years and peaks at about age 14 (Berndt, 1979). Consistent with these readily observable changes in peer relationships, brain imaging studies have shown that several areas of the brain make adolescents more sensitive to the rewards of peer relationships than adults (Albert, Chein, & Steinberg, 2013). This motivates teens to focus on their peers in decision-making situations that involve risky behavior.
Second, adolescents are more distressed than adults when excluded by peers. A brain region known as the right ventrolateral prefrontal cortex (PFC) might be important in helping people cope with negative evaluation from peers by reducing distress. Research shows that this brain region is used more heavily by adults when being socially excluded than by adolescents (Sebestian, et al., 2011). When teens do use this area of the brain during peer exclusion, they report lower levels of distress (Masten, et al., 2009).
During the adolescent years, however, this brain region is still developing (Blakemore & Mills, 2014), so adolescents may not be as effective at controlling distress during peer social exclusion. This likely contributes to engaging in risky behaviors to prevent being excluded by their peers.
Third, another area of the brain, the lateral prefrontal cortex (PFC), is responsible for mature self- regulation and develops gradually over the adolescence period (Albert, et al., 2013). In one study, early adolescents, late adolescents, and adults behaved similarly on a computerized driving task when they were by themselves (Gardner & Steinberg, 2005). However, when they were paired with two same-aged friends, clear differences emerged. Early adolescents were more likely to engage in risky driving when friends were present. Late adolescents were somewhat more risky in their driving when they were with friends. The presence of friends had no impact on adults’ driving
Introverts, Extroverts and Risk-taking
Are you more likely to take risks if you are an extrovert or an introvert? Or do you just choose a different type of risk?
Let’s look at examples of extroverts and introverts first.
Extroverts tend to seek information more through engaging with the outside world. Introverts tend to seek information more through observation and reflection. If you are an extrovert, you tend to relax by being around other people. If you are an introvert, you tend to relax by being by yourself.
One theory of risk-taking is that extroverts may be more likely to take risks because they are more comfortable engaging with the world around them. Here are three studies that find extroverts may have advantages over introverts in the area of risk-taking:
Extroverts may take more risks in learning than introverts. When learning a second language, extroverts are more likely than introverts to join a language-learning group and use their language skills inside and outside of the classroom. It is thought that extroverts are more likely to engage in classroom participation, which involves risk-taking behaviors such as asking questions in class and meeting with one’s teacher. Classroom participation is a key factor in the acquisition of a second language in a school setting (zafar and Meenakshi 2012)
3. Surgeons who scored as “extroverted” were more tolerant of risk than their introverted peers. They scored as less likely to be reluctant to admit a mistake to a physician than those who were introverted (Contessa, Suarez, Kyriakides, and Nazdam, 2013)
However, according to Susan Cain, the author of Quiet: The power of introverts in a world that can’t stop talking) (2013), introverts are just as likely to take risks as extroverts – we just need to take a look at the type of risk.
Introverts are more likely to take calcuated risks than their extroverted peers. Calculated risks are ones in which a person steps back and looks at the pros and cons of a decision before taking action. Cain writes that introverts may be less likely to want instant gratification than extroverts, so they take the time to think through things thoroughly instead of jumping right in. They don’t need a result or payoff right now. Introverts also tend to have more experience with self-reflection – this improves the odds for a good decision because you are looking at if any of your biases are impacting your decision. In many areas of life, such as in the business world, the risks you take must be calculated risks. Cain argues that you want introverts on your team when you are faced with big decisions.
So it’s possible that extroverts and introverts take risks equally – just a different types of risk.
What Oprah and Warren Buffett can teach us about risk?
Oprah Winfrey left her steady job as co-anchor of the six o’clock news in Baltimore to host a third-rate talk show in Chicago. After boosting that show’s ratings to first place, she launched her own show, which became the highest rated program of its kind in history, airing 25 seasons from 1986 to 2011. Her estimated net worth is $3.1 billion.
Warren Buffett, Chairman, CEO and largest shareholder of the investment firm Berkshire Hathaway, is considered the most successful investor in the world. His nickname in investment circles is the “Oracle of Omaha.” Many investors prefer to stay away from stocks that fluctuate in price, believing them to be risky investments. But Buffett views risk and volatility differently: Risk is the possibility of losing your initial investment, while volatility is synonymous with opportunity. Buffett prefers to invest in “value stocks”; that is, stocks that are undervalued relative to their earnings potential. His current net worth is estimated at $67 billion.
What do Oprah Winfrey and Warren Buffett have in common?
They are both calculated risk takers. The take home message from these success stories is not just that perseverance pays off. It is that successful entrepreneurs are not risk-takers, they are calculated risk-takers. As Winfrey puts it, “one of life’s greatest risks is never daring to risk.” This is the key concept that Leonard C.Green emphasizes in his highly rated entrepreneurial courses at Babson College. It’s no wonder that U.S. News & World Report has ranked Babson as the top college for entrepreneurship 19th years in a row.
Take a calculated risk on yourself. You can become wonderful, generous, successful, admired, and perhaps rich. Trust me, you can do it, you really can. Your life is all about working out how to reach your manifest destiny of happiness and high value to yourself and other people you care about. Work out a goal that is super-ambitious but which you really believe you can reach. And then, I promise you, you will. Otherwise you’ll be stuck in square number one without advancing one step forward. It’s your choice!
Article about why Nokia failed missed the point, and why it matters to Singapore