We often travel uncertain paths, making best guess choices without full knowledge of what is to come. How can you know if you are taking appropriate risks or unreasonable gambles? Remember that gambles are characterized by three traits: you have no control over the outcome, the odds are against you and the consequences of failure are high.
In one of my job interviews I was asked whether I had ever considered starting my own business. Without thinking, I told the truth, something along the lines of ‘Hell, no. There’s no way I would mortgage my house on a crazy business venture.’ Unfortunately, the questioner had done just that—multiple times. I spent the rest of the interview trying to dig out of that hole. (Despite my best efforts, I got the job.)
It is natural to avoid risk. Studies show we feel a loss of five dollars far more than the joy of getting five dollars. Given our evolutionary background, when failures could be fatal, this is understandable. However, a fundamental lesson of life is that most good things come from taking risks. That is why we are often admonished to get out of our comfort zone. Playing it safe while waiting to be discovered is a strategy for pink slips, not promotions. How can you know if a planned strategy is a considered risk or a foolish gamble? Consider the three factors of control, odds and consequences.
Can you control the outcome? The quintessential example of a gamble is the throw of dice. If the dice are true and there are no other shenanigans, your chance of winning is dictated purely by chance. An activist approach to life implies making choices and charting courses of action. In other words, taking control of your life. In a true gamble you have no control. You are abdicating your future to something other than your own ability. Other than making the initial bad decision to pursue the gamble, you have nothing to do but sit back and see what happens. Even if the outcome is good, you cannot take credit for the result. Being lucky is not the same as being good.
Are the odds against you? A second characteristic of a gamble is that the odds are against you. You want situations where odds work for you. Every businessperson knows that the last thing you want is a fair fight. You can lose fair fights. The goal of all business strategies is to tilt the odds in your favor as much as possible. If you are not unsuccessful in this, then someone else is and they are better positioned than you. You’re gambling if you think you can win. Whether in business or life, few survive chasing low odds.
Can you survive failure? A gamble is one that has a high penalty for failure. Even a ninety percent probability of success implies that failure is possible. Are you prepared to lose? Betting the farm on anything is a foolish gamble, assuming you don’t have multiple farms sitting around. Risking money you can afford to lose is one thing. Reasoned pursuit of future gain may be considered an investment. Risking everything you own with no safety net left over is something else. It is dumb.
When considering choices in life, ask three questions. Do you control the outcome? Is success likely? Can you afford to deal with failure? If the answer to any of these questions is ‘no’, then you may be about to embark on a foolish gamble.