Properly balancing risk/reward.
Sorry for being a few days late on this - been extremely busy! Anyways, I recently wrote a post on Project Lifeline and the housing crisis. Many people took the risk of using an ARM for their mortgage and paid…big time. When trying to decide between whether a risk is worth taking, one must look at the entire picture and the decision oftentimes boils down to the simplest of things: common sense. Risk is a sexy word. People like to be risky because it gives the notion that someone lives life on the edge. Oftentimes it is said that the greatest rewards come to the people who are willing to take the greatest risks. I don’t agree with this statement. I believe there is a fine line between being risky and being stupid. When debating about a risky situation, I like to keep the following things in mind:
- What are the repercussions (both good and bad) : You must always consider the best case scenario and the worst case scenario for every decision you make. If the good outweighs the bad heavily, you are probably taking a solid chance at something. If an endeavor you are taking would significantly change your life for the worse, you must be very careful with the decision you make.
- The people it affects : This could fall into the repercussions category, but I think it is important enough to list on its own. If you are making a decision that could ultimately worsen things for several people around you, you must put a lot of thought into what you are doing. The people who love and admire you should not be punished for a risk you wanted to take.
- Use common sense : The most important one of all! Using common sense is the ultimate tool for making a decision. Decide whether or not a decision you are making is logical and aligns with your views of life. You should not live your life perpetually scared, but you cannot throw all your hard work away for a “chance”.
When I make decisions, I think long and hard about what I am doing. I try to make the best decision for both me and the people around me. It is important to understand all the factors going into making a decision and one must use keen judgment when balancing the risk vs. reward for a venture.
[ratings]
February 18th, 2008 at 1:15 am
So interesting for me to read this at this time. I feel that you are very correct in taking chances, risks and stupidity.
Most people do have common sense and then there are those who truly do not. I feel that every day that I’m working with a new client I’m taking a risk in a way but I’ve got some background to help me through the personalities. Every once in awhile and luckily for me it’s rare, I find that the client I took a chance on, had a indifferent feeling about - not back necessarily but just a gutt reaction to - always turned out to be that “stupid choice” or risk you might say.
I felt, I knew and I acted stupid by taking on that client.I also know that the client is out there taking that same risk with me. If that client has an issue with me to begin with, why would they hire me? Is is stupidity? Or,,, are they just unforgiving souls? The latter I think is true in this last scenario for me.
Thank goodness, it only happens once in awhile but in my trade, it does happen.
March 8th, 2008 at 12:45 pm
[…] the answers without putting any of the work in. Every action has a consequence, as I discussed in a previous post. You must properly balance the risk vs. reward of every decision and think about everything […]