Risky Business

Dear reader,

I recently published an article about time management, or to be more precise, how it is not possible to manage time (HINT: you must manage your priorities instead). If you didn’t read that article, then please go ahead and give it the old once-over first as it ties in nicely with what I’m going to say next.

You see, one thing I didn’t muse upon in that article was the role that risk plays in the mastery of our priorities. In fact, the thought only occurred to me as I was browsing read.cash recently and came across an interesting article written by Laurenceuuu.

Similar to my own web3 freelancer backstory, @Laurenceuuu is on a journey to creative independence and is looking to monetise his passion for writing. After some careful thought, he’s decided to build a website to showcase his work. He considers this a risk, but along with that risk come countless other opportunities. I’m sure he’ll do fine.

The article prompted me to think about my own risk. What risks have I taken? Have I taken enough risk? What is my appetite for risk? After some thought it became clear to me that managing risk is something you have control over, just as you do with your priorities and where you direct your attention in the limited time you’ve been gifted on this planet. In my previous post I spoke about investing in yourself in order to leverage your quality output, reduce your quantity output and gain more time for yourself. Well adding a measure of risk can amplify this procedure.

Let’s take a step back now and talk about risk in general. Why does it have such a bad name? When people think of risk, they tend to attach negative connotations to it. Why is this? Well, it is actually rather straightforward, as it is hardwired into us as human beings; hardwired into the neurons in our brains, a gift we inherited from our ancient ancestors who lived amongst the beasts.

We humans are cursed by a phenomenon known as Loss Aversion. Basically this principle states that the emotions we attach to a loss are far stronger than those we feel when presented with an equivalent gain. Don’t follow me? Can’t blame you. It’s probably your loss aversion protecting you from understanding the concept. Either that or my writing is too confusing.

Let’s try with an example, shall we?

It's Friday morning. Bob’s walking down the street and finds a crisp $100 banknote on the sidewalk. Happy days! He writes it down in his diary, tells his colleague about his find over coffee and moves on with his day. Later that evening, he exceptionally buys an extra round of drinks at the pub for his chums. Come Monday morning, he’s pretty much forgotten about his find.

Two weeks later and Bob heads off to the post office to send a package. He’s running late. He quickly passes by the ATM to get 100 bucks to cover the costs of shipping and a few drinks after work. He stuffs the banknote into his pocket and hurries down the road. Disaster strikes at the counter as he realises that the $100 banknote has fallen out of his pocket. Bob retraces his steps but he cannot find it. Never mind, he returns to the ATM, takes out some more cash and continues with his errands. Walking between the ATM and the post office, Bob squints and stares at every single scrap of paper in sight. He cannot let it go. Finally he arrives at the office and sits down angrily behind his desk. He can’t concentrate, the missing money is haunting him. The weekend drags on and on. His mood doesn’t change. By Monday he’s almost back to normal, but he’s still bothered ever so slightly. What a silly loss!

Then it strikes him, such a simple thought: “I already found the missing $100. 2 weeks ago. An advance payment! I’m even.” And in theory, he is. The equivalent values match each other perfectly. But his emotional balance is still very much tilted. He cannot let it pass. He still feels the loss. And it stings.

Have you ever felt like Bob? How much more would you need to win in order to cancel out your emotional debt of an equivalent loss?

So thanks to Bob’s misfortune (or was it?), we’ve seen how our mind plays subtle tricks on us when attempting to evaluate profit and loss. We’re screwed, right? Well it gets worse… There’s yet another phenomenon at play and that’s called Homeostasis. It’s another complex one, which I won’t get into too deep here, but suffice it to say that our brain works like a thermostat. It (the brain) knows that there is a clumsy sack of skin and bones stumbling around below that’s meant to be protecting it 24/7. It has a few cards up its sleeve that it pulls out whenever it feels threatened and when it does pull those cards out, the body will default back to whatever behaviour it was that made the brain feel safe and comfortable in the past – just like a thermostat controls the heating when the weather changes. The bug in this code is that people with toxic habits and addictions have effectively hardwired their brain to defaulting back to that toxic behaviour.

So there’s no hope for us moving forward is there? Well there is, kind of, for some of us at least. “Fortune favours the brave” they say. What does that mean? Fortune is money. Favours lead to returns. Bravery involves risk. Hence, those who take risks will get paid. The question we should ask ourselves then is: How much risk do we need to take in order to get paid?

For this, I think we need to work with scales. It makes it easier for us inadequate humans to estimate where we are on a sliding scale. Not that it matters really, as we’ve already seen that we can’t even allow ourselves to believe that $100-$100=0. I think I’m going to call in help from our old pal Moe Szyslak for this one.

No risk?

At the very bottom of the risk scale is the risk of doing nothing at all! I believe that taking no risk at all is in fact a risk in itself and it took me many years of comfort to finally realise this the hard way. By keeping yourself trapped in homeostasis and loss aversion, you risk missing out on a lifetime’s worth of opportunity and growth.

In monetary terms, this is holding fiat hostage in your savings account. By taking a “no risk” approach to your money, you are already risking it’s future value and your own purchasing power due to the devastating effects of inflation.

Risk rating: Düff Beer (look closely, it’s not what you think it is)

Low risk

Once you realise that you’ve been living in step 1, and that you’ve unwittingly been taking risk all this time, it should be easier to rise to the challenge and take on some low risk activities. Ideally every person should take on a calculated low risk challenge every now and then.

This usually involves coming out of your comfort zone. Asking out that girl at school, trying a new recipe for the first time, learning a new language, giving a presentation at work. For the crypto natives, this may equate to buying your first Bitcoin or Ethereum.

Risk rating: A single plum floating in perfume, served in a man's hat (will leave a bad taste in your mouth, you’ll get over it)

Medium risk

As your mind, body and finances mature, so too will your appetite for risk. As you enter the realm of medium risk, allocation, weighting, positioning, timing, etc., should become far more important factors in your calculation. To some it becomes an addiction, a rush. Others choose to steer away and protect their ass(ets). In any case, the further along the scale you go, the more opportunity to unlock potential growth you discover.

For the web3 wanderers out there, I suppose you could bundle the more speculative investment plays in here like alternative smart contract ecosystems, hard forks such as Bitcoin Cash, utility tokens, etc.

Risk Rating: Flaming Moe (you’ll likely get burnt at some point)

High risk

This is certainly not everybody’s cup of tea and rightly so. Jumping straight from the lowest risk level to the highest level is also not recommended. Engaging in higher risk activities is something that requires training and experience. Climbing up trees with a heavy chainsaw is a high risk activity, although I doubt that you arrive at the top of the tree and learn to operate the saw on the spot for the first time.

For the digital asset degens out there, this kind of risk category covers illiquid NFTs and memecoins. I suppose we can algorithmic stablecoins to the mix now too.

Risk rating: Forget-Me-Shot (basically you’ve lost control and cannot mend past actions)

As you can see risk comes in different varieties. It’s possible that a person could live some aspects of their life risk free, but may welcome high risk endeavours in another part. Another person might have a clear plan of when they want to entertain some calculated risk to grow and at what point they will taper off their adventure. There is no one-size-fits-all approach to this subject matter, but if you’ve risked your eyeballs on this article of mine, then I hope you take home the message that a little bit of risk is OK and that you’re probably already taking some whether you know it or not. Try to come out of your comfort zone every now and then – that’s where they hide the good stuff!

In conclusion, I’d like to thank @Laurenceuuu once again for having the courage to share his experience about his risk. I was in a bit of a creative hole, not knowing what to write about next and reading his article sparked an idea and I ran with it. If you’re interested in my creative writing process then you might find some value in this previous article where I break down my creative process.

Signing off for now,

Jase

Digital Media Freelancer

Resources:

Cover image credit: https://www.pexels.com/photo/unrecognizable-woman-sitting-on-zipline-6156369/

Drink credits: The Simpsons, 20th Century Fox.

• Flaming Moe, as seen in "Flaming Moe’s" Season 3, Episode 10

• A single plum floating in perfume, served in a man's hat, as seen in "Homer's Barbershop Quartet" Season 5, Episode 1

• Düff Beer as seen in "The Springfield Files" Season 8, Episode 10

• Forget-Me-Shot as seen in "Eternal Moonshine of the Simpson Mind" Season 19, Episode 9

Original content, copyright JaseDMF 2022. First published on read.cash.

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