Recently, an opportunity presented itself that would be considered somewhat of a risk considering my current situation. There were a number of people who were also considering this opportunity that would equally translate into a risk for them as well. Ultimately, many decided to not attempt the risk, which made me want to take a stab at it even more. The reason for this thought process is generally related to the Pareto principle, or what is better known to most as the 80/20 rule. This was initially an economic rule created by the Italian economist, Wilfred Pareto, which stated 80 percent of the Italy's wealth was owned by 20 percent of the Italian society. From this, society has created a number of different interpretations of the rule in relation to a number of different things, e.g. sales activity, marital focus, and leadership. What I related this to in consideration of this decision, however, is that 80 percent of the world rarely take risk and attempt to live lives as predictable and comfortable as possible. However, it's these 20 percent who put themselves out there and take a swing without knowing that everything is going to work out who often end up living the lives they've always dreamed down the road. If one thinks about it, the reasons one should take risk are simple.
RISK USUALLY YIELD THE BIGGEST OPPORTUNITIES
If you know anything about investing, the index funds that generally project the highest return on your investment are also the ones that either A. has the highest volatility from year to year or B. is a dependent on a set of factors or circumstances (i.e. merger going through or government policy being passed) that are somewhat out of the investor's control. The reasons the ROI is so high is because the risk is so great, so your decision to invest in such an opportunity must be offset with a return that will prove worth the attempt. This is true in life when an opportunity comes by that makes us sacrifice or puts us in a position in which we are not sure. This "unsureness" and/or sacrifice often will create a huge opportunity on the backside if we are able to get through it successfully. For those who always play it safe and "stay close to home," they could potentially be missing out on grand opportunities that are waiting for them if they are willing to get outside of their comfort zone and push themselves to another level of excellence that they may not be even aware they possess themselves.
IT'LL STRETCH YOU TO MAKE YOU BETTER
One of the great things about risks is that even when you don't succeed as you may had ultimately planned, it still stretches you to improve the person you are in a number of areas. When you take risk, the reason it is considered said risk is because there are a number of things that are outside of your control and that you don't have exact experience with per se. Often, if you desire to be successful at your new endeavor, you have to educate yourself on those things which you do not know and attempt to build a bridge from where you are to where you want to be in relation to understanding how to control the situation. By taking on this risky endeavor, you put yourself in position to stretch your current abilities and improve in areas which you may have never considered before. Often, the times of our greatest growth are those times in which we feel the most uncomfortable initially and allow ourselves to make mistakes and continually learn from them. Without taking risk, we generally do the same things over and over and have only incremental growth, if any at all.
YOU CAN ALWAYS RECOVER
The last reason why risks are generally a good idea is because, at the end of the day, there is always the ability to recover. Especially when you are young in your life, risks should definitely be more considered since, if you do fail, you have a lot of time to make up any setbacks this may have created. Admittedly, as you age, your tolerance for risk should lessen, since you have much more to lose, but if you have planned things out accordingly and given yourself enough of a financial cushion to be willing to have a minor set back here or there, you should still be able to take calculated risk to receive a larger return when it presents itself. Take Donald Trump for example; he took a number of calculated risk during the 80's and 90's in real estate and many of them didn't turn out the way he had hoped. He bombed and had to declare bankruptcy several times before getting back on his feet. His net worth before those decisions was in the low hundreds of millions (not bad, I know). His net worth now is approximately $2.7 billion. Clearly, the lessons he learned from those mistakes gave him the knowledge he needed to course-correct and create the empire he has today.
Calculated risk. As the title suggest, you have to make sure that whatever risk you take is well thought through and considered from every angle. I'm not suggesting that you should go to Vegas and put your entire life savings on black. That's just foolish. However, I am suggesting that you keep an open eye for an opportunity that you would initially pass up because it would be considered by most as too "risky" that could yield big dividends for you if you take a swing at it. As always, do your due diligence by investigating all the ends and outs of the opportunity before pulling the trigger, but don't let the fact that most people wouldn't do it deter you from taking the shot. Most people aren't millionaires either (less than 1% of the world's population to be exact).
Ken Middleton is an Account Manager at TEKsystems that specializes in IT staffing and services. He is a graduate of UNC-Pembroke and current MBA student at Scheller College of Business at Georgia Tech. You can follow his daily quotes of inspiration and motivation on Facebook, Twitter, or LinkedIN
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