It was our usual conversation. Whenever I would tell my mother about the next who-would-do-that? adventure Bernadine and I planned to go on, the next why-would-you-go-there? country we planned to visit, she would say the same thing. “You’re a bright boy … why do you want to kill yourself?”
Well, let me assure you, I love being alive as much as the next person. And while I admit that trekking the mountains of Northern Pakistan, canoeing in the Amazon, and journeying into the Sahara aren’t everyone’s idea of a vacation, that hardly means I want to kill myself.
What may surprise you is that it’s not a matter of risk tolerance. It’s a matter of risk assessment.
Before going on an adventure or picking a country to explore, we do our research* to assess the associated risks. It’s not that our tolerance for risk is especially high. It’s that our assessment tells us the risk is low.
In business, we read about the importance of taking risks. About how the risk-takers are the ones who get rewarded. Yet I wonder if these so-called risk-takers had especially high risk-tolerances or were especially good at risk assessment.
In the stories I read of business leaders who took risks and succeeded, it’s rare to come across someone who assessed their chosen course of action as high risk (meaning a low probability of success and severe consequences for failure) and simply got lucky. More often than not, they had good reason to believe that their choice wasn’t as risky as most people thought.
I’ve also read stories of business leaders who took risks and failed. It was often because they prided themselves on being risk-takers and let their egos override the need for a sound risk assessment.
When making big decisions for your business, the greatest risk you face is making such decisions based on your risk tolerance without conducting a risk assessment.
So the next time you’re contemplating swimming with piranha in the Amazon (really not that big a deal … unless you’re bleeding of course) ask yourself this: Am I deciding based on my risk tolerance or risk assessment?
Play the odds. Understand both.
Make it happen.
Michael
* Reviewing the U.S., Canadian, British, and Australian governments’ regularly updated, travel advisory websites is a good place to start.
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How Risky are Your Decisions?
