#64 Calculated Risk vs. Reward

What’s the Downside?

Calculated risk versus reward.  What do you think about when you hear this statement?  Whether I'm investing in stocks, in businesses, or with my diet, I’m always looking at the potential downside.  What’s the downside?  What’s the worst-case scenario?  Based on data, analytics, and intuition, I’m better equipped to make decisions.  This puts me in a better position to see if something is going to work, and to identify any potential downside.

Business

Take investing, for example.  The downside of investing into something is that you expose yourself to the risk of losing every dime.  It doesn’t matter whether it’s $1 or $1,000.  It’s the same feeling. 

When vetting an opportunity, I rely on sound analytics, my intuition, and a positive gut feeling.  Look, sometimes things go wrong.  I’ll ask questions like, “If I lost everything on this, will it change my lifestyle?  Will this impact the way I operate?  What happens if it works?  What are the potential upsides?”

The Washing Machine

I run it through the washing machine.  I’ll ask myself, “If I put $100 into a stock that I’m interested in or believe in, then goes to zero, will it change my Tuesday afternoon?”  It’s not.  On the other hand, what happens if that stock triples?  Would that change my Tuesday afternoon?  You better believe it.  I could sell $200 worth of it, buy a stock that pays me a dividend till I’m 80 years old, and leave my cost in there.  Big difference.

Let’s say I put $100 into something, then it goes to $300.  I then piece off $200 and put it into something else.  All of a sudden, those shares of AT&T pay me $30 a year.  Then I keep buying a new share every year till I’m 80.  What’s the difference?  You see what I’m saying?  I’m calculating the risk.

Not as Calculated

Now, there's been times in my life that I couldn't be as calculated.  Early on in my career I had to believe in what I was doing.  I was all-chips-in.  There was no Plan B.  There are times in life where you just have to break through.  As you get further down the line, being more calculated becomes more important.  I believe there’s value on both sides. 

Sometimes burning the boats is the only way to progress forward.  Sometimes being more calculated makes more sense.  As you progress and as you compile mini wins, you start to look more closely at the upsides and downsides.

My Diet

Take my diet, for example.  We’re out on a Thursday night at a local restaurant.  I’d love to have a Guinness beer.  I’d love to have those cheese curds.  But guess what?  It’s not in the guidelines.  What’s the downside?  If I drink that beer and eat those cheese curds on Thursday, then Friday morning will be much more difficult to get out of bed.

I’m the leader of the #4amcrew.  I can’t be missing workouts.  If I don’t follow through on my training and diet, then I won’t be as tight.  Not only this, but it’s also going to fuck up what I'm supposed to do on Friday and Saturday when I’m actually able to cheat.  I’m one day further away from achieving my goals.

Continued Progress

How do you consistently progress forward in business, personal life, and in the gym?  I’ve been married to my processes for so many years, constantly testing different variables to see what does and doesn’t work.  What’s the best and most efficient way to do this or that?  It could be someone’s first time investing, starting a business, or taking their diet seriously.  I want to be able to help.  It’s what I do.

Calculated risk & reward.  Applying this concept to all areas of your life will put you, and keep you, on the road to success.