Facing the risk of failure is less threatening when one understands the difference between a risk and a gamble.
Risk permeates the drive for success like garlic in an Italian restaurant. It is the 600-pound gorilla in the success equation. And when it comes to achieving success – either as an individual in the corporate world or as an entrepreneur – risk both discourages and encourages.
The risk of failure in any effort to succeed paralyzes many, while actually empowering others. Risk reveals cowards, heroes, fools and fortune hunters all at the same time. Some equate risk with the fearsome thought of swimming among a pack of hungry sharks, while others embrace risk like a skilled lion tamer in a circus.
Risk cowers many for the simple reason that it is often highly overrated. Risk is often overestimated as a threat to success because most people equate risk-taking with gambling; they believe they are one in the same. The truth is that a risk and a gamble are not interchangeable concepts; indeed they are antonyms not synonyms. The only connection between a risk and a gamble is that the ultimate outcome is unknown.
The Certainty of Uncertainty
By its nature, risk is something with an uncertain conclusion, but with experience, planning and management, it can be mitigated and the outcome influenced. On the other hand, a gamble has an unknown outcome that is impervious to external influence. In short, a risk can be managed but a gamble cannot. There may be risk for an experienced, highly trained rock climber to attempt to scale the northwest face of Half Dome in Yosemite Park, but for those who have no experience, planning or training, such an effort would be a pure gamble; and as with any gamble, failure becomes a virtual certainty.
The key philosophical difference between those who shrink from risk and those who embrace it is that the former seek certainty, while the latter are willing to accept uncertainty. Risk takers can live with uncertainty, because they understand that while risks can’t be eliminated, it can be managed.
The irony is that those who are uncomfortable with the uncertainty of risk often are taking the biggest gamble, because they abdicate any possible control of the outcome. Those who are motivated to accept risk understand that the reward for accepting uncertainty is significantly greater than the penalty for failure.
Many also fail to take into account that risk is relative. They tend to see risk as solitary and in a vacuum, but often risk is interrelated to other actions. Sometimes not taking a risk creates an even greater risk that few take note of in their deliberations.
A Personal Report
In 1987 I was president and CEO of ITT Life Insurance (a subsidiary of the Hartford). By all accounts this was a great job. To those on the outside, the position offered power, prestige and great compensation; it was a sign of my personal success. And yet, I walked away from all this “success and security” to join with others in an effort to start a new company. Friends and family – including my parents – uniformly questioned my sensibilities in taking the risk – in their minds a gamble – to walk away from what seemed a safe and secure situation.
From my perspective the risk was relative. For me it would have been more of a risk – really a gamble – to stay at ITT Life, trapped in the stultifying, suffocating bureaucratic culture of the Hartford. While others viewed my escape from the cocoon of the bureaucratic security at Hartford as a pure gamble, my analysis convinced me that the real gamble would be to stay put. The alternative of striking out on my own was a manageable risk that offered far greater rewards and, in reality, less downside risk if I failed. At least I could influence the outcome; whereas at Hartford I would be at the mercy of events I could not control. (That is unless I was willing to sell my soul to the bureaucrats, which would have been an even greater risk.)
Besides, having spent over two decades in the life insurance industry I was comfortable with my knowledge of the business. I recognized an industry in the midst of fundamental change and had a plan to convert the upheaval into opportunity. This meant that a risk not taken – to leave Hartford – would have been the biggest risk of all.
Those who ultimately achieve success in their careers do so by first learning to distinguish the difference between a risk and a gamble. They do not pin their future hopes on the randomness of a symbolic turn of a card or a roll of the dice in their career. Instead, they became a risk manager, by assiduously studying hazards to success and developing ways to minimize them as much as possible. The person addicted to taking a gamble, whether in a Las Vegas casino or by attempting half-baked business ventures, always loses in the long run, and loses big. A person who is prepared and willing to accept reasoned risk-taking will sometimes lose as well, but they will win more times than they lose, and the wins will always be bigger than the losses.
In the end, success boils down to the individual’s experience and ability to accept and manage the risks that are the prelude to any success. Every time a cardiologist performs heart surgery, there is a risk of failure. It is the doctor’s knowledge, experience and training that reduces the risk to acceptable levels.
When you come down to it, the odds for or against success are meaningless. Sure, 93 percent of all new businesses will fail, but that only tells part of the story. The vast majority of those who failed did not understand the difference between a risk and a gamble, and as a result were unprepared to succeed. The secret is to figure out how to be one of those seven percent who learn how to mitigate risk and be prepared for success. You’ve probably heard the popular saying, “Fortune smiles on the prepared.” It was Louis Pasteur who said, “Chance favors the prepared mind.” (Sara Palin is the exception that proves the point in that, “Chance favors the impaired mind.”) We may not always win, but the chances for winning are enhanced when we can recognize the difference between a risk and a gamble and when we are prepared to deal with risk. Those are things failures all fail to do.
Certainly success has been achieved by those who were oblivious to risk, but when that happens, in falls more into the category of the gamble taken to win the lottery. It can happen, but do you want to stake your future on that approach?
Likewise, sloppy risk management can sometimes be worse that just taking a gamble on the future, because such an effort offers a false sense of security. There will always be something unanticipated that will happen and unless you are prepared to manage this risk, it becomes no more than a gamble. Mitigating risk depends on identifying the specific risk, analyzing options available to meet it and taking specific action to overcome it. There is no gamble in facing risk with that attitude and approach.