Transcript

People take risks all the time.

Jaywalking is one simple example. You see the cars coming but you assess that there is enough time for you to get out of their way.

Businesses take risks all the time to serve their customers. They introduce a service or product to solve their customer’s problems to make a financial profit out of it.

“He who is not courageous enough to take risks will accomplish nothing in life”, according to Muhammed Ali, who understood at a deep level what it takes to succeed.

Success doesn’t land in anyone’s lap. You have to work hard for it and actively chase it by taking risks. You have to take risk to be successful.

No one achieves success by playing safe. The world outside your normal comfort zone can be intimidating. But until you take that risk and put yourself into that uncomfortable space, you’ll never reach your potential and be successful.

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Taking a risk is never going to be danger-free. But taking a calculated risk brings a higher chance for rewards. By proactively managing the outcomes, you are effectively lessening any potential harm and increasing your odds and extent of a positive outcome.

A calculated risk is a carefully considered decision that exposes a person to a degree of risk that is counter-balanced by a reasonable possibility of a greater benefit. Assessing whether a risk is worth it involves a careful cost-benefit analysis.

Typically, calculated risk applies to business risk. But people can calculate risk in their personal lives as well.

When you weigh possible outcomes and determine that the expected return of a positive outcome outweighs the relative risk of a negative outcome, you can say you are taking on calculated risk.

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So, what is a calculated risk?

Would you cross a 3-lane road of fast-moving traffic? The answer is likely to be a “No”.

What if I asked, would you cross 3-lanes of traffic at night? Still a “No”?

What about if I said, would you cross 3-lanes of traffic that had a pedestrian crossing?

See how the risk changes?

A calculated risk means that it is the same road with the same cars, but you have gone from a risk that you were unprepared to take to one that has an element of controlled and expected outcome.

Would you quit your job right now and set up a business on the street corner in an hour’s time? Of course not.

However, would you quit your job with a plan of action in a set period of time? Possibly.

The thing about calculated risk is that humans have to deal with their perceptions of reality, their emotions, feelings, and even beliefs to be able to take on risk and succeed in life.

You may have come across people who turn down contracts, delay travelling, delay saying “yes” to marriage, delay quitting their job, and even delay having their hair chopped off because they have not been able to calculate the risk with an outcome that they deem will be satisfactory.

Taking calculated risk is an unavoidable component of your success.

If you can get past the level of fear that comes with such a risk, many benefits can await you on the other side.

When you spend time and money to upskill yourself, start a business, or even build a prototype, you lay the required foundations for the future growth that you will need in order to succeed.

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This is where your attitude towards risk and risk-taking is important.

People who are risk-averse shy away from taking risks. They prefer to have as much security and certainty as is reasonably affordable in order to lower their discomfort level.

Risk-averse individuals will often pay in excess of the expected cost just to achieve some certainty about the future. They are willing to pay extra to have the security of knowing that unpleasant risks would be removed from their lives.

A risk-seeker, on the other hand, is a person who hopes to maximise the value of their retirement investments by investing the stock market, for example. Much like a gambler, a risk-seeker is someone who will participate in card games or gambling as long as a positive long-run return on the money is possible, however unlikely.

Risk-taking behaviour is just one personality trait of a successful entrepreneur. People who are engaged in risky activities when they were younger were more likely to be successful entrepreneurs later in life.

This is where risk-seeking individuals will likely participate in dangerous sports like bungee jumping or sky diving.

Apart from a risk-averse person or a risk-seeker, a risk-neutral person’s risk-taking preference lies in between these two extremes. Risk neutral individuals will not pay extra to have the risk transferred to someone else, nor will they pay to engage in a risky endeavour. They don’t pay for insurance, nor will they gamble.

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The reality is that the world is filled with calculated risk takers who understand when to take action and when to walk away. Risk takers are not deterred by fear of failure or an inability to make decisions.

While people are appropriately risk-averse, none are so conservative as to never take chances. People who succeed are often those with a healthy balance of caution and proactiveness.

If you can embrace a mentality or mindset that sufficiently balances the two, you will develop an essential character trait for success.

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Thanks for watching.

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