I thought it would be a routine 45-minute strategy discussion, but it turned out that a phone call I had earlier this year with a close mentor/advisor/investor completely changed how I think about risk and strategy. And only many months later have I realized how much my perspective has shifted.
For context, we were discussing what the next 1-2 years could look like for my company, and he asked me to list out as many possible future scenarios as I could, as well as how the underlying market/landscape could change.
Prior to that conversation, I assumed risks were “known” and “unknown”, and that I should have mitigation plans against all known risks. And as I was talking through the risks and resulting strategies, this person called me out. As an aside, one of the best things about starting a company is feeling the burden and responsibility while also having a close group of people who can call out your specious reasoning.
That conversation changed both how I think about risk and also whether it’s worth having plans to mitigate all known risks.
The first big realization is that your imagination is probably much more powerful than you think, but fear sometimes limits you from seeing all the possible realities. You can probably imagine many more possible realities, as long as you acknowledge yet control fear. Be aware of it but don’t let it limit you. And by being exhaustive, you can turn many unknown risks into known ones.
Risk is uncertainty and uncertainty can lead to feelings of fear. That fear is a good thing and it’s there for a purpose, but don’t let it stop you from imagining what the future might look like. Unfortunate things can and will happen. But it’s entirely possible to imagine all future outcomes (both good and bad), while still acknowledging fears, but not letting them preclude you from imagining what you’ll see along the way, or where you’ll end up.
So that’s the first part - take the time to imagine what the future might look like. It’s ok to feel fearful about certain outcomes, but don’t let that fear stop you from imagining as many possibilities as you can come up with.
There’s a second part to this, and it’s your decision as to whether you’re going to insure against that risk, or not (I’ll refer to this as “self-insuring”). So for any risk, the decision is to insure or self-insure.
Insure: Concretely this means, having a plan if it happens, be it an actual insurance product, some strategy if/when it happens, or some general mitigation pan), or Self-Insure. This means you’re not going to come up with a mitigation plan; instead you’ll proceed with a strategy that assumes that thing won’t happen. And if it happens, you’ll just figure it out then.
A life without risk, in my opinion, is a life devoid of beauty. I might change my mind on this in the future as I get older, but I do believe this right now.
We’re all heroes on our own journey. The hero’s journey is part and parcel of being human.
Humanity celebrates heroes because they push their boundaries and take risks to become better versions of themselves. Sometimes they prevail, but other times they don’t. Both outcomes are ok.
I think it’s easier to take bold action when you’re more familiar with the terrain. Bad things might still happen but at least they won’t be a surprise. And maybe, some of the things you used to subconsciously avoid and treat as an unknown risk is actually insurable, and better yet, the way for you to get to the place you’re trying to go.
Risk isn’t something to dread, but something to understand. By broadening your imagination, acknowledging your fear without letting it dominate you, and choosing thoughtfully whether to insure or self-insure, you can approach the future with more confidence and clarity. In doing so, you just might discover that the paths you once thought too risky are actually the ones that lead you exactly where you want to go.
After all, there’s no such thing as a bad risk; the only way a risk is bad is if it’s mis-priced. But that’s for a future blog post.