More on risk tolerance

Philip Morgan

A few weeks ago I asked y'all to fill out a survey on risk tolerance. 67 of you did. Thank you!!!I wanted to report back with a few more details on what I learned.Here was the overall breakdown in self-reported risk tolerance:In case those numbers aren't very legible:Avoid risk: 10 (14.9%)Neither avoid nor embrace risk: 27 (40.3%)Embrace risk: 30 (44.8%)To folks who said they don't avoid risk (meaning they put themselves in the second or third category), I asked two followup questions:WHY do you not avoid risk?andIs there anything else you want to share about your relationship to risk?I'd like to share some of the interesting responses to those two questions. I made the survey anonymous, so I think it's OK to share the responses here verbatim.WHY do you not avoid risk?I acknowledge the risk and go through the "what ifs" and worst case scenarios but most things worth pursuing involve risk, so in my view to avoid risk is avoiding growth and the life I want.Always been in my DNABecause it is a gateway to opportunities and growthBecause moving forward and getting out of your comfort zone requires taking some risksSane people never changed the world. To make a difference, you have to venture where others are afraid to go - they call that risk; I call it seeking for something better.I have taken risks before and lost, so I am more wary nowadays, less gung-ho.No risk equals stagnationBigger risk often means bigger rewardRisk leads to growth. I am inclined to avoid risk but I plan and research and reason my way to a place where I take "reasonable" risks. (e.g. quitting my job to become a consultant)Risk avoidance strategies can create more "unknown unknown" risks for a false sense of security.There's always something to learn for taking risks, the outcome mightn't always be good but a lesson can be found in it.Navigating risk and taking opportunities brings me alive. Would rather go hungry and enjoy taking on some mammoth project that demands me to grow if I am to succeed ... than have a day job that suffocates me.I like to set my goals outside of my capabilities so I can continually grow. Without welcoming risk growth would be impossible.Because avoiding risk altogether may/will lead to a known undesirable outcome. For example, if you invest in CDs early in your life, you are almost guaranteed to not have enough funds for retirement. The alternative, investing in growth vehicles like real estate, stocks or a business, is more risky but is the only course that has the potential outcome of attaining a desirable financial goal.Generally speaking, avoiding risk is avoiding opportunities.Because oh how boring life would be without riskWiring in the brain, neophilia . I tend to score high on the Novelty Seeking scale.Growth happens outside of the comfort zone, where things are more riskyThis will sound silly, but I promise there is a point. I'm a Libra, so my symbol is the Scales. I think that mathematically it is the most balanced of all the signs and my approach to risk-or just about anything-tends to be that way also. I do have a hella temper and my greatest challenge has been keeping it in balance (proportion) to the size of the perceived insult. I'm quite proud, so the size of the perceived insult can be quite large. The only area where I am "out of balance" the most is here. I do not avoid it because life=risk. The everyday, especially more so for certain genders or races, is inherently risky. Even driving can lead to an unfortunately fatal encounter.I tend to just "do the math" on major decisions, and then pre-solve for x....what are the chances that x will happen and how will I respond. Being high anxiety means that this process removes a great deal of the mental "ouch factor" if something goes wrong, which it inevitably will.Because some amount of risk is needed to make progress. There are certainly things I do not risk (e.g. paying a contractor, or saying exactly what I think to a customer), that risk is stupid, but taking a risk to potentially open up an opportunity that does not have a potential huge debilitating downside, I'll take the risk.I suppose our tolerance for risk has something to do with our safety nets and support systems. I have family, savings.... perhaps risks that are big for me are not really as risky as they would be for others (if I really crash and burn I still have my house, and if I burn that my family has houses). But it's more than that. I'm looking for something. I believe there is something (or many things) out there for me and I have to take risks, and keep moving forward, if I'm going to find them. All that said, risk tolerance is subjective. I'm a responsible risk taker (is that a thing?).I have learned you need to take risks to have a chance to have a payoff or to grow. I have a wife and want to make sure we are taken care of and on the same page, so I am careful about making calculated risks and trying to talk through as much as possible around those risks we are looking at taking. But I think that risks are an important part to live.For my long term survival, I can only accept taking risks in the quantity and for the subjects I can cope with. If things go wrong, I know that, that was what I decided to accept and was happy with.Personal history teaches us that avoiding risk also means missing opportunityIt is unavoidable. Might as well get use to playing with risk.Sometimes it’s faster , easier, simpler, to just take a little risk for a good return.I already spent the last 20 years in a relatively safe career path and am comfortable taking on some risk.I'm 15, so I have no expensesAssuming you mean absorbing risk for my clients, I know if I'm going to be of any real (non-commoditised) value to them, I need to reduce some of their risk by increasing some of mine. I haven't found a perfect way of doing this yet, as a lot of my work is printed documents (often 200+ pages x 10k/20k printed copies) so to guarantee something like accuracy could potentially cost me my house :) still thinking about how to offer real guarantees/reduced risk."If it were easy, everyone would do it. Doing the hard (risky) work is the only way to move ahead. Basically, Seth Godin's idea: not taking risks is actually riskier can magnify the rewardsI believe we get rewards only if we take a riskRisk is somewhat unavoidable, being out on my own. Then again, I have to balance the need for income with the need to take risks that may help my business grow.I've lived most of my life making decisions out of fear. In the last ten years it has become easier to embrace risk if I analyze it a bit, and come up with a fallback plan should the worst outcome happen.Because I've been driven by fear for too long. It didn't help! Got more courage (rational or irrational, I dare not say) than ever before.Playing it safe hasn't paid off, it keeps you comfortable and complacent and doesn't feel challenging. Its been the times when I've made a "risky" decision that reaps its rewards the most. It has helped me grow as a person.I try to understand what the risks are and plan responses.We recognize that some risk is inevitable, and that some risk has reward worth going for. When we accept that consciously I guess we are embracing risk.I know that I am most creative when I am uncomfortableWith risk comes greater potential gains and more challenge. It pushes you to be betterWithout risk, there are no rewards.I know that was a long list, but I think for those that had the interest in reading it, it's an interesting way to "get to know" others like you. In other words, if you're not a risk avoider, you're among a lot of other non-risk-avoiders, at least on this email list.Let me leave the risk-avoiding ~15% of you with some thoughts:The startup end of the software industry lionizes risk-taking. I think that's a problem because it may encourage you to adopt a risk posture that's misaligned with your risk profile (Your risk profile is your actual comfort with risk-taking behavior combin ed with your ability to sustain a loss as a result of risk-taking behavior). So if you are a risk-avoider, fucking own that. Don't let the broader tech culture make you think there's something wrong with you. There's not. You get the best results when your decisions align with your actual risk profile, not a front you're putting on to appear like a risk-taking monster.In fact, if you're a risk-avoider in the world of software, you are probably naturally good at helping your clients make decisions that help them avoid risk, and that is something that many businesses will pay a real premium for. Again, if you're a risk-avoider, own it. It's not a bad thing.And if you are a risk-taker like lots of your fellow list members here, own that too. Comfort with risk has plenty of upside as well.This post is too long. Part 2 coming tomorrow.-P