Calculated Risk-Taking

In early January of this year, I published a blog titled C’mon Man, Take Some Risks!   In that blog, I discussed the need to take risks to be successful.  To further that discussion, we need to think about what risks we need to take.

The risks we need to take are our calculated risks.

Calculated Risks

A calculated risk is an undertaking whose chance of failure in terms of degree of probability has been estimated before the undertaking has been acted on. Furthermore, that degree of probability is within the tolerances of the risk-taker when compared to the chances of success.

In other words, in considering your options, you thought through what might go wrong before you took any action, and determined that the chance of something going wrong were acceptable when compared the benefits of what might go right.

The key consideration here is determining what might go wrong and what might go right.  And, of course, we also need to determine what the probabilities are of each right and wrong choice.

Outcomes and Fear

When choosing between taking specific risks, there are many possible outcomes.  For simplicity, we will consider a right outcome, which is exactly what you want to happen, and a wrong outcome which is everything else.

The problem in estimating calculated risks is our inability to determine what the risk is for each outcome correctly.

This is easiest described in an example.

Public speaking is frequently described as the number one fear of most people.  Many people will do anything to avoid having to talk in front of a group of people.

On the other hand, most people have no concern over getting into a car as a passenger and worrying about the fitness of the driver, the worthiness of the car, and the condition of the route you are about to follow.

In 2015, there were some 6.3 million fatal, injury, and property damage vehicle crashes that occurred in the U.S.   No person was killed or injured while public speaking.  Yet, we are more afraid of public speaking than riding in a car.

This tells us that when evaluating risks, our emotions are unreliable.

We need to make sure that when we are considering calculated risks, they are not based on our fears or gut feelings (our emotions), but are evaluated base on measurable and determinable facts.  That is why they are called calculated risks.

Determining Calculated Risks

Unfortunately, many risk choices are not susceptible to scientifically scrutiny when considering their chance of success.  Here are several suggestions that will make calculating a risk’s chance of occurring less daunting.

1. Do not be risk-averse. Many risk-averse people think of themselves as deliberate, cautious and thoughtful when in reality these characteristics are masking a lack of belief in themselves.  Be aware of your personal tendencies.
2. Do not over-analyze. Every choice can be vetted to a certain extent.  Others have ventured down the same path as you are treading and most likely they will be able to share opinions, successes, and failures.  Manufactures, for example, can provide references, and in many cases, you can operate a trial run to see your choice in action.  But at some point, more data and information just become information overload.
3. Visually compare alternatives. Developing a pro/con whiteboard and inviting vested parties to add to it is a great way to visually look at your choices and see the upsides and downsides.
4. Be sensitive to your emotions. Are you underestimating the risks because one of the options is something you want (like a new, untested production machine where you will be the first to own)?  Or are you overestimating the risks because its not your idea, a competitor has it already, or it doesn’t fit your concept of how you want to operate?

The Bible

One of the awesome attributes of being a follower of Jesus is that He has removed all our eternal risks so that we can focus on the temporal risks.  And those temporal risks are bracketed by the lessons of the Bible.

The risks delineated by God are both simple and difficult.  Luke 6:27-28 says.

But I say to you who hear, love your enemies, do good to those who hate you, bless those who curse you, pray for those who abuse you.

The Bible tells us the most important thing is to love our neighbors.  That is the most important activity we need to be concerned with.  Decisions made by looking at calculated risks pale in comparison to the sacrifice Jesus made and the love God is asking for.

No, the Bible will not tell us what equipment to buy, where to invest our money, or who to hire.  Those are temporal risks the He has given us the intelligence to calculate on our own—insomuch as they conform to loving, doing good, and blessing others.