March 26, 2021

Risk vs Reward

Whenever you are deciding whether or not to take some sort of action, you do a risk-reward analysis in your head.

It might be conscious or it might subconscious but you do it.

I’ll prove it...

Closely observe your internal reactions as you ask yourself the following questions:

• “Should I skate on this frozen lake?”
• “Should I start a YouTube channel?”
• “Should I start taking boxing lessons?”
• “Should I start a daily mailing list?”
• “Should I let my 10yo daughter have a smartphone?”
• “Should I spend \$100k to buy a SaaS?”
• “Should I try skydiving?”
• “Should I change the name of my business?”
• “Should I start a rock band?”
• “Should I niche down on a specific target market?”
• “Should I order the oysters for dinner?”

Did you have an immediate reaction to any of these potential actions?

If so, it’s because you did an instantaneous calculation of your perceived risk and reward of taking the action.

The thing is, you might not know what part of your brain made the calculation.

Was it your irrational lizard brain? Or was it a rational reaction?

Here’s an exercise:

Go back through anything in the list above that you reacted to with a “Heck No!” and rate them in two dimensions:

1. On a scale of 1 to 3, how bad is the worst thing that could happen?
2. On a scale of 1 to 3, how good is best thing that could happen?

...where 1, 2, and 3 map to:

1 = Something small that only I will know about

2 = Something medium everyone I know will hear about

3 = Something big that will end up in the news

If any of your “Heck No!” answers rate a badness of 1 and a goodness of 2 or 3, you might want to reconsider.

Yours,

—J