Creativity, Innovation, Advertising Effectiveness, Kindness. Founder/Co-founder of Previously Unavailable, Tracksuit, AF Drinks and Caffeine. Programme Director of the Master of Advertising Effectiveness.
Embracing risk is critical to success in business, innovation, creativity and life. Risk shouldn't be avoided. But it should be approached mindfully. Here's four questions I always consider, but I rarely see being asked enough: 1. How big is the risk, actually? We humans are generally risk-averse. It's a well-documented area of behavioural science. It's not our fault, it's how our brains evolved. But it does mean that we tend to consider risk binary. We feel *any* risk is bad and to be avoided or eradicated and that zero risk is always the best outcome. In fact, risk always sits on a spectrum. Figuring out where the risk is on that spectrum means asking 'what is the worst thing that can realistically happen if we take this risk and fail?' and 'how genuinely likely is that to happen?' When we ask those questions and really think through them, we often surprise ourselves - finding that the worst case scenario is not particularly bad or likely after all. 2. What is the potential upside from taking the risk? One of the causes of risk aversion is our loss aversion bias - we fear losses more than we value equivalent gains. Therefore we over-focus on potential losses and under-focus on potential gains. So we need to correct for that by spending more time thinking through and listing out the potential upside. When we do, we often find that the magnitude of the upside is far greater than the magnitude of the potential loss. 3. What's the potential downside from not taking the risk? When we don't take risks, we leave room for others to take those risks and benefit from their upside. If and when they do, we actually do 'lose' in a relative sense. They create a competitive advantage or a market share gain *and* they strengthen their own risk muscle, making them more likely to beat us again in future. 4. Could we easily recover from failure? This is the question that's barely ever asked. Risk is rarely catastrophic or existential. If our worst case scenario should play out, how easily could we correct and recover? Often when we work through the answer to that question, we discover that we're perfectly capable of recovering from the failure quickly, cheaply and easily. When weighed against the potential upside, this is often when the equation balances in favour of taking the risk. When we don't ask those questions, we default to avoiding risk. When we do, it puts us in a position of being able to take the positive, calculated risks that lead to long-term growth, wealth and happiness. #business #innovation #creativity
Ant Salmon
1y
Someone once taught me that a good guide for making big decisions is to choose "the path of least regret". I suspect that might often lead to taking the risk.
"When we don't ask those questions, we default to avoiding risk. When we do, it puts us in a position of being able to take the positive, calculated risks that lead to long-term growth, wealth and happiness." Well said James
Tom Brand
1y
Some great questions to ask! People are naturally risk averse as it involves change and uncertainty, which we generally don't like. But the rewards are worth it. Otherwise, as a species, we'd still be sitting in fear in a dark cave!
Tony Rogers
1y
Great questions
As always James Hurman love your insightful posts and agree fully with your points… but on number 4 this is a area for much needed discussion - I really do try to have an experimental mindset around failure, use them as an opportunity to learn, evolve and improve on what I’m doing. The challenge with us is often the public consequence of failure is brutal. This makes it really hard to get back up after a catastrophic failure, especially when money is involved and public perception. Personally, this has been the biggest barrier for me taking risks and launching ventures again.