The Risk, Reward Ratio

The Risk, Reward Ratio

Tim Connor

What is your attitude when it comes to taking risks?

Risk - possibility of loss or injury, someone or something that creates or suggests a hazard, the chance of loss or the perils of actions and/or decisions.

Every day we all take risks although most of us don’t look at routine actions in this way.  For example – when you drive to work and are traveling at seventy miles per hour aren’t you assuming that each mile you drive that someone behind or in front of you won’t hit you.  When you go out for lunch aren’t you assuming that the restaurant has clean and healthy routines for storing, preparing and serving your meal?  When you are admitted into a hospital aren’t you assuming that everyone follows the right procedures?  When you get on an airplane and travel at 400 MPH at thirty thousand feet are you assuming that the manufacturer built the plane correctly and the pilot is properly trained and professional? Etc.

Risk is a normal part of life, everyday life and yes I get it that the items I mentioned are not often a big deal when we define risk however, consider the many tragedies from plane crashes, food poisoning and auto accidents.  Yes, these happen very seldom when you consider the total number of planes that take off every day, the meals that are served nationwide every day and the number of cars that travel US highways every day. 

I mention these to ask you to consider how you define risk.

A new career is a risk.

Marriage is a risk.

Starting a new business is a risk.

Jumping out of airplanes is a risk.

Again – etc.

So what is risk really? It’s living.

Let’s briefly discuss the risk reward ratio when it comes to living each day.

Since all of life involves some risk whether minor or major before we take action it might be prudent to consider the risk reward ratio. The risks involved driving to work might be less than jumping out of an airplane but they are always present. The issue here is can we handle the various outcomes that are the result of our actions?

Ever had an auto accident?  Was it your fault or the fault of someone else?  Doesn’t matter - the consequences are the same assuming it was not a life threatening situation or caused you to lose the use of your car.

Insurance claims, estimates, arranging alternate means of transportation, inconvenience and maybe a doctor’s appointment.  The fault isn’t the issue here as you both will have to deal with the after effects or what I am referring here to as the reward.  If you haven’t figured it out by now the reward is not necessarily a positive thing as the actions caused by the accident are the rewards but are not positive.

The reward is nothing more than outcomes or consequences, so why not call them that rather than a reward?  I don’t know I thought this title might better get your attention.

In planning - before a decision and action we sometimes try and consider the rewards (consequences) but there is no way we can know the future in the present.  The future is unknown.

If you own a business or have started one I’m sure you have had a few surprises along the way you didn’t anticipate.  In hindsight, knowing what you know now (consequences) would you have still made the same decision?  Again this is pure uncertainty.  The answer – depending on the severity of the actions you plan to take do you spend adequate time considering as many possible consequences as possible.  This will never be 100% accurate.  You will always miss things, but the most important question you need to ask before you act is simply – “no matter how this turns out – am I OK with whatever consequences show up?”

"Only those who risk going too far can possibly find out
how far one can go."
T.S. Eliot