Some Thoughts on Risk

So much of our culture is based on incorrect views of risk

If I were to tell anyone in my family that I’m quitting my job tomorrow to go work at a startup, they would say that’s a risky move. What if the startup doesn’t work out? And they are correct; it is risky to leave a cushy job. But this argument fails to acknowledge that staying at my job is also risky. Staying at my current job means I have zero chance of ever becoming super wealthy, someone who builds an entirely new institution and impacts the world in some way, someone who loves their work passionately and obsessively.

Standard advice is to diversify your investments. If one asset goes down, you still have a chance that another asset will go up. Jeff Bezos did not do that. He put all his eggs in one basket when he started Amazon. Had he instead stayed at his job and put all his time and effort into investing in the stock market with diverse investments, he likely would have been a multimillionaire but nowhere close to a billionaire. Did he take a risk? Yes, but he would have also taken a risk by staying.

Somehow, in our culture, we believe that taking action is risky, but inaction is risk-free. This is wrong.

Of course, not everyone is Jeff Bezos. If you have no talents or conviction, stay where you are and diversify your portfolio. Leaving your job is probably much more risky than staying put (though both are risky).

But not everyone who starts a business is an idiot.

Not everyone who skips college (which can waste 4 years and much money) is an idiot.

For some people, going to college is the more risky bet.

While I believe that most people are not Jeff Bezos, I still think most people in the US lean too much to risk aversion. So many people I know feel stuck and miserable at their six-figure jobs but are afraid to jump ship. I believe that as a society the middle class has become less entrepreneurial - perhaps because student debt and credit card debt are much higher and people are afraid of defaulting.

I believe the problem is that whenever people consider a change (for themselves or someone else), they think what if it goes badly? And they cannot handle the idea of failure — too risky.

In most situations, a better way to think about things is “what if this goes amazingly well?” In that case, not doing anything becomes too risky.

It’s a mindshift that is usually worth it.