I do agree with all of that. To a certain extent.
It is very true indeed that some gains come with some risks and in life generally, we have to make a lot of educated guesses anyway. However, I think there is a difference between taking intelligent risks and stupid risks. It is really important to be able to differentiate between the two as the outcomes or the gains are on two opposite ends of the spectrum. When it comes to deciding whether a risk is worth taking, there are a few factors that need to be considered, which I call the three ‘O’s.
Sometimes it is easy to get overly excessive about a certain topic that we think we know everything about it to enable us to decide whether it is wise to make a risk. For instance, I used to get absolutely fixated on making big gains in the shares of one particular company. I would study as much materials as possible on the subject and industry relating to that shares I was investing in, believing that I knew everything there was to know on that stock. Based on that belief and being completely tunnel-visioned, I decided to take the risk of putting a couple of months’ salary into the stock. Guess what happened? That stock sizzled and not only did I make nothing out of it, I lost two months’ worth of salary within a week
I have seen people making really irrational or stupid decisions to take risks for the sake of taking risks. People would choose ‘to go all out’ when they feel the obligation to do something or are faced with a lot of pressure. Making important decisions like that under such circumstances often backfire. It is recommended that we pause and not do anything unless we have sufficient information to support our decisions before choosing whether a risk is worth taking. Having said that, we also need to be aware of the timing of making that decision, as a good decision could potentially become a bad decision when the timing is wrong, or if we wait too long.
Assessing the risk itself is also a factor to consider when deciding on taking or not taking a risk. We should look at each situation and study the odds of success as well as the stake involved objectively before deciding if the risk is worth it. It is also about thinking rationally and looking at things in perspective before taking the plunge head first. When I was offered a job many years ago, I was contemplating to negotiate for more money than what was initially being put on the table. It was then 2008 when the economy was pretty bad and there were a lot of people out of work. I was just starting out in UK and so needed a steady income to establish myself. The stake was quite high for me generally but I felt I could still afford to take a calculated risk by asking about a possible increased amount but not push for it. In the end, I got a marginal increase and I felt happy that I asked the question.
*Photo Credit: Andrew Lance