Archives for posts with tag: Risk

There are old pilots, and there are bold pilots. But there are no old, bold pilots.

So goes the saying. It’s about risk, isn’t it? The idea that if you take risks, eventually your 9 lives are going to run out and you’re going to fail. If this is in a mission critical line of work, then that failure could be final.

In business, though, you can make the argument that if you’re not failing, you’re not moving quickly enough. Business – especially innovative, disruptive business, is about seeing the opportunity, moving quickly, executing and getting the timing right. You don’t have the luxury of endless iterations while you try and improve to the stage of ‘perfect’. Perfect doesn’t exist.

To have tried and failed not only makes you a better person, it makes you richer for the experience.

Take risks. Fail early, fail often. Then, when you do succeed, you’ll have succeeded quickly, before everyone else, and you have the right window to keep improving while you make hay.

That’s the the promised land for bold pilots, old and young, I think.

Advertisements

Where are you on the risk aversion spectrum? Super safe, insuring everything, or cavalier and blasé about your belongings and family? Somewhere in the middle?

It’s a tough one. Some insurances – like car or mortgage protection – you have to get. Others, clearly, you don’t. Some people seem to view insurance as something they’re entitled to get a payout for, after a few years of claim-free premiums. ‘Yes, I could do with a new living room carpet; time to engineer some spillage..’

For those of us who are more honest, however, either you view insurance as a necessary evil or an unnecessary ‘nice to have’. I used to belong fairly and squarely in the former camp. These days, though, I’m not so sure.

Firstly, there’s the financial argument. If you never pay for metered parking, one day you’re going to get caught and your fine might equate to all the fees you should have paid. That’s fair enough, and not really an insurance example, more a general risk and return argument.

I hire a car quite a lot, and I always take out excess insurance, so that I’m properly covered in the event of any incident. I have friend who doesn’t take it out, figuring out that if he does eventually have a prang, then the cost of picking up the tab will be off-set by all the times he never paid for the extra insurance.

The other dimension, though, is the success rate for a real claim. These days the small print seems to exclude almost every eventuality for which you’re taking out insurance in the first place. I have mobile phone insurance, but if I leave it in my car, it’s only covered against theft if it’s in the glove compartment and the compartment is locked. Who does that?

I used to work for a guy who never insured any of his contents. He simply didn’t bother; it wasn’t worth it to him. His reasoning was ‘Who’s going to steal a bed anyway?’ Well, presumably a bunch of organised thieves who know you’re away for a weekend and stage a fake house-moving heist. This chap would simply go ahead and buy replacement stuff if it ever happened. He could afford to.

But the question remains. As insurance companies are often in similar financial straits to lending organisations, and with premiums sky-rocketing, there is a huge incentive to make the claiming process as rigorous and parsimonious as possible. They’ll wriggle out of a payment if they can.

 

In US life insurance, people with good genes and sensible lifestyles are accorded the lowest premium and the status of ‘super preferred’. In effect they’re rewarded for not being a risky proposition for financial institutions.

Extrapolating this argument, the safer you are, the more you save during the course of your life. But then, when your life is over, and you didn’t really live it to its fullest extent because you were limiting your risks and your payments while alive, who is the winner there? Not you, at least not to this writer.

It occurs to me that there is a parallel in business. These days, immense macro forces like globalisation, commoditisation and automation are making it more and more essential for companies to do something special, and be something special, for their customers. Otherwise, they’ll just get replicated and replaced by a cheaper ‘me too’ substitute.

So is your business simply bobbing along, keeping its head down and playing it safe, while not trying anything too risky? Or is it constantly trying new, risky stuff that keeps it ahead of the pack that’s soon to become extinct?

In business, the super preferred life is not a life worth living.

And on another parting, and unrelated thought, this is post #400 :-).

Have you ever seen a poor bookmaker? No, I didn’t think so. They understand the mathematics and they play the numbers. The numbers are their business. The business of probability, taken to the nth degree.

We should play by the numbers in work and life too. It makes total sense to manage things by the probabilities. What are the chances of this happening? What seems the best option? What’s the worst that could happen and how likely is that?

OK, so we might get tripped up every so often, but we can never legislate for the 1-in-a-million thing happening so why worry about it?

Air travel is still far and away the safest form of travel. While ‘what’s the worst that could happen’ is pretty unthinkable, it’s still the safest form of travel.

You have to live your life, otherwise you’d never leave your bed, swallowed up by fear, uncertainly and dread.

Playing the numbers is about understanding risk and what the risk is for a given situation.

I’m all for proceeding cautiously, in business or in life. Some of us are more circumspect than others. It’s question of degree.

Too much caution, however, too much safety is bad for you, and can kill you. You can only take so many precautions, otherwise you’re wracked by indecision, the opportunity is gone, and you’re too late.

How many times have our children – or we see children – spend an afternoon plucking up the courage to do something like dive or jump off something high, only to lose their bottle and spend the journey home lamenting the fact that they didn’t do it.

I was reminded of too much safety in a rather humorous way the other day. I arrived at the local pool to pick up my daughter and her friend from swimming and there was a young boy having the time of his life. He had found the pool’s stash of arm bands and had put 3 on each arm and 4 on each leg. He was a mini orange Michelin Man.

As as the pool attendant saw him waddling around on the pool side, however, she told him sternly that no arm bands were allowed on the legs, it was dangerous. I guess if you had them on your legs and not your arms they might tip you up, but the irony of the situation wasn’t lost on me.

Too much safety young man! A lesson for all of us, for all our lives.