Which Risks Are Worth Taking?
“The major challenge facing most foundations is that they are risk averse. This inhibits their ability to experiment and commit to the experimentation and innovation process.” — Steven Levitt, author of Freakonomics and his latest book, Think Like a Freak
Though they often pose no real-world threat, big decisions can feel terrifying. They incite our fight-or-flight response, and for fear of making the wrong move, we succumb to analysis paralysis instead of finding the clarity we seek.
Spin, spin, spin. Ponder. Chew. Second guess. Analyze. Journal. Meditate. We throw our hands up and impatiently ask, “WHERE IS THE ANSWER AND WHY ISN’T IT HERE YET?!”
I’m no stranger to this. Whenever I find myself trying to over-intellectualize, talk ad nauseum with friends, or otherwise “hash out” a next move in business (or relationships for that matter) without making any real sense of progress or clarity, I know it’s time to take a step back.
At this point, there are two courses of action I like to take (often a combination of both):
- Get quiet: relax, meditate, tune into my gut instincts. If there is no clarity, sit with the discomfort and trust that the right next action will arise. Trust that things will work out, and look for the learning in the meantime.
- Get curious: see the situation like a scientist. Look for experiments I can run. Gather more data.
In my work with clients building their business or with those who are on the brink of a major pivot, one of the most helpful things we can do is take some pressure off by seeing any next moves as a series of experiments.
Be The Scientist
Consider the scientific method:
- Ask a question
- Form a hypothesis
- Test the hypothesis
- Analyze the results
When it comes to life and work, any area you are stuck is an opportunity for experimentation.
Formulate a hypothesis based on what you think will help move the needle (increasing your happiness, meaning, money, or whatever other metric you are optimizing for) and determine a few small experiments you can run to start testing your theory.
No amount of thinking alone is a substitute for real-world data.
What kinds of experiments are best?
Optionality And The Asymmetry Of Opportunity
In his book Antifragile: Things that Gain from Disorder, Nassim Taleb gives the perfect formula for determining which risks are worth taking, and which experiments to look out for.
For the most part, entrepreneurs are antifragile — they tend to grow stronger from adversity as long as they continue adapting to their environment.
Here are some key terms that will help you find situations where you have much to gain:
Optionality is the property of asymmetric upside (preferably unlimited) with correspondingly limited downside (preferably tiny).
Fundamental Asymmetry: When someone has more upside than downside in a certain situation, he is antifragile and tends to gain from (a) volatility, (b) randomness, © errors, (d) uncertainty, (e) stressors, (f) time.
Rational Optionality: Not being locked into a given program, so one can change his mind as he goes along based on discovery of new information.
— Nassim Taleb, Antifragile: Things that Gain from Disorder
Look for opportunities with high optionality and asymmetry. Stay open to changing your mind as you discover new information.
Here’s a great summary on optionality and asymmetry from blogger Tren Griffin — here’s one note he adds after the Taleb line (in quotes):
“Optionality can be found everywhere if you know how to look.” Living in a city, going to parties, taking classes, acquiring entrepreneurial skills, having cash in your bank account, avoiding debt are all examples of activities which increase optionality.
30-Day Decision Tracker Template
Without the proper perspective on a situation, it’s all-too-easy to get mired in the weeds of emotion, hope, future worry and past regret.
This template is hot off the presses and by no means perfect or complete (I’m still in the midst of a 30-day experiment and observation period myself!), but I’d love for you to try it out and give me feedback!
How it works:
- You’ll choose one area you’d like more clarity on and rate how you feel about it each day.
- You’ll also rate your baseline mood (how you feel about everything else)
- The template will automatically track daily variance (the effect of the specific tracking area on your overall mood) and chart the two against each other over the period of one month.
- You can write short daily notes as you go to track more qualitative data/feelings.
Caveats: This is highly subjective and not truly scientific, but it will certainly encourage you to take a more objective stance on a big question you’re grappling with and see how you feel over time, not just in the heat of the moment.
No Decisions Are Ever Really Final
At the end of the day, ANYTHING you choose to do (or not) will bring more data. That’s a good thing!
When running experiments big and small, remember that it’s all learning, it’s all data, and it’s all good. Stay curious. Be the observer. Trust your gut. Look for situations where there is high potential upside but you wouldn’t be absolutely destroyed by the downside, then dive in with an experimental mindset to test the waters.
Part of learning to be agile and antifragile is seeing chaos and challenge as doorways to learning, growth, and opportunity.
Fear, insecurity and indecision are par for the course, and almost always mean you’re around the corner from discovering something important about yourself. Keep going.