Is Risk Too Risky?

surf water ocean guy surfing surfer 300x225 Is Risk Too Risky?

Risk is all around, even in our hobbies.

Everyone has their own tolerance for risk. Some people love the adrenaline rush of having everything on the line. Think of Texas Hold Em players who love going “All in” or people who can’t skydive enough.

On the other side are people who are terrified of risk. These are people who stuff money under the couch cushions, stay inside all day with their blinds closed, and wear oven mitts when they touch door handles.

Of course, the majority of people fall within these two extremes, but the point of this article is to discuss risk, how we view it, and maybe it can help you to understand where your risk tolerances are.

How To Avoid Risk

Risk is an inherent characteristic of any action. Basically, if you do something, then there is some element of risk attached to it. Risky describes the magnitude of risk. Something that is risky is considered to have a larger amount of risk.

For example, there is risk involved with leaving your house. What if you walk out the door and an asteroid lands on you?

It isn’t likely, but the risk is there. Most people would agree though, leaving your house isn’t risky in-and-of itself. Driving is more risky than leaving your house, and skydiving is more risky than driving.

Every activity listed in this area has some level of associated risk. What I’m getting at is: You can’t escape risk. It is everywhere, it is all around you, and you just have to deal with it. There is no way to avoid risk completely.

Jobs Are Risky

People like working for well established companies because it provides a few benefits:

  • Health Insurance
  • Vacation Time
  • Steady Paycheck
  • A set number of hours (usually)

Those are really nice. In fact, it looks like you avoid a lot of risk with going that route. Let’s look at the risks of starting your own business.

Starting a business risks

  • Outright failure of the business
  • Losing the collateral (this could even be your home)
  • Lawsuits if you do something wrong.
  • Competition
  • No set hours, you could easily work 80+ hours a week!

Why would anyone choose starting a business over getting a job? To understand risk, you have to look at the other side of things. I’m sure you’ve heard of Risk/Reward, and this is the whole other side that some people forget about. Risk exists because there is an increased chance of reward. When you get that cushy job, you give up these things:

  • Being the boss, and never having to answer to someone.
  • Working the hours you choose (even if you are working less).
  • Having a potentially infinite income (you’re capped at your salary/hourly wage).
  • Working where you want whether it be an office, cubicle, beach, hotel room, or from home.

Don’t Fear Risk

The best advice I can give you is to not fear risk. You face it everyday, but you may not notice it. Don’t place so much emphasis on risk that it paralyzes you from enjoying reward. Think of all of the successful businesses out there. Had the owners not taken the risk, they would not be enjoying the benefit.

On the flip side, look at all of the unemployed. Had many of them taken more risk, they may not be in financial dire straits right now. Next time, I’m going to be providing a personal example of risk taking that I had to contend with. This will help to illustrate risk, its constant presence, and where risk may be necessary.

Updates:

Comments

  1. says

    I love riding my bicycle, but I had an accident 10 years ago. I had a bicycle accident because someone opened their car door. I hit the door and flew over breaking my collar bone. After that I chose to ride my bike on a bike path because it was safer. I chose to reduce the risk. In anything I do, I take calculated risks.

    • says

      Hi KC,

      There’s nothing wrong with cutting down on risk at all! I’m pretty conservative as well, you certainly won’t find me jumping out of planes. Great job on illustrating cutting out unnecessary risk. You really are a teacher at heart :).

      Thanks,
      Timothy

  2. says

    I agree with you. Risk is everywhere; it’s only the degree that changes. I think it is best to avoid risk in some cases- like Krant’s example of riding the bike,but I also think it is good to seek risk- like you talked about when it comes to jobs. The real thing to remember is evaluating risk and benefit. If the benefit is high then the risk is worth it.

    • says

      Hi Miss T,

      You’re correct. I believe in minimizing risk, but I also believe in enhancing your returns. Unfortunately, they are at odds with one another and that’s where it is our job to find our risk tolerances. Thanks for stopping by!

      Thanks,
      Timothy

  3. says

    It’s good to think about why you avoid certain risks though, and make sure you’re using logical principles – for example, someone who keeps all their money in their house because they don’t trust banks – there’s probably a higher risk of your house getting broken into and all of your money being stolen than there is from keeping your money in a bank (well, in the U.S. anyway.)

    My point is, be aware of whether your risk avoidance actually puts you in a more risky situation! And the way the do that is through self-education, of course :) Reading websites like yours!
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