How to Think About Risk

Risk tends to get a bad rap. We associate it with things like losing money in the stock market, or riding a motorcycle without a helmet. But risk isn’t the enemy—it’s a permanent, pervasive, unavoidable part of life.

Risk is the flip side of every opportunity, every career move. When George Clooney aggressively auditioned and sold himself for ER, it was a risk: The show could have been a high-profile flop, dragging his career down with it. There is literally no career opportunity in the world that’s worth talking about that is risk-free.

The thing is, we are not all equally skilled at how we deal with risk. Some people think they’ll achieve career stability by minimizing risk. We’ve all heard a million variants of “I’m going to stay at my job because at least it’s stable and a steady paycheck.” Ironically, though, in a changing and increasingly unpredictable world, succumbing to complacency is one of the riskiest things you can do. Inaction is often much riskier than action.

Others reveal their ignorance about risk by acting as though it’s a sign of weakness to acknowledge the possible downsides in a plan. “Failure is not an option!” may make for a good movie line, but it’s no way to formulate a career strategy. Of course failure is possible; failure is always possible, and in fact it’s even more likely if you pretend risk doesn’t exist.

Risk is everywhere. And that’s okay. You just need to learn to work with it. Rather than fleeing risk, you should develop the skill of taking intelligent risks. It’s a rare skill but a necessary one. It’s what allows you to seize those breakout opportunities that make for an exceptional career.

Of course, not all risk is created equal. Confronting your boss about a problem you’re having with a co-worker involves the risk of earning a reputation as a tattletale. Negotiating for a higher salary involves the risk of seeming greedy or arrogant. Freelancing on the side to build toward a portfolio career comes with the risk that your performance at your day job will suffer. These risks are worth it if the potential upsides are worth it, if the likely benefits exceed the likely costs. And they may also be worth it if you determine that any negative consequences aren’t likely to occur. The ability to do this sober calculus is the skill we’re talking about.

Situations rightly referred to as risky, then, are those in which the risk level crosses an unacceptable threshold. For example, flying on a commercial airplane of a major airline is not risky, because while the downside scenario of a crash would be catastrophic, the likelihood of a crash is extremely low. Meanwhile, the reward of rapid transit is significant. There’s risk when you get on a plane, but it’s so low that commercial flights should not be referred to as risky. Once you internalize this definitional nuance, you’ll see sloppy uses of the words risk and risky appear all over the place.

Admittedly, some entrepreneurs are irrational, reckless risk-takers: cowboy-types willing to bet the farm in pursuit of a crazy dream. But what sets the great entrepreneurs apart from the pack is not a high tolerance for risk, per se. It’s their ability to judiciously assess and manage risk.

The intelligent risk-takers are the ones who strategically pursue only those opportunities with enough upside to justify the possible downside. It’s one of the key skills that make entrepreneurs successful, and it takes work to master. “If you are not genuinely pained by the risk involved in your strategic choices, it’s not much of a strategy,” says Reed Hastings of Netflix, one of the great, judicious risk-takers of his generation.

This is just as true for careers as it is for startups. If you don’t have to seriously think about the risk involved in a career opportunity, it’s probably not the breakout opportunity you’re looking for. We’re going to say that again: If you don’t feel the need to contemplate the risk related to a career opportunity—if you feel no fear—it’s probably not a breakout opportunity.

Pretending you can avoid risk causes you to miss opportunities that can change your life. It also lulls you into a dangerously fragile pattern, leaving you exposed to a huge blowup in the future. What’s more, you can never perfectly anticipate when inflection points, black swans, or any other career-threatening event will occur. When you’re resilient and thoughtful about risk, however, you can play for big opportunities with less worry about the possible consequences of unanticipated hiccups. For the startup of you, the only long-term answer to risk is resilience.

Here are some exercises that can help you think about risk and your career:

• Identify—and plan to take on—a new risk that is acceptable to you but that others tend to avoid. Are you okay having less money in savings and taking a low-paying but high-learning job? Or maybe a month-to-month employment contract as opposed to something longer term? Go find a project with risks you see more clearly than the average professional. It will differentiate you.
• Revisit your Plan Z. Is it still viable? If your Plan A were to unravel, will you still be in the game? Consult mentors in your network to help think through contingencies. Also, remember that if your risk assessment of an opportunity is truly contrarian, other people may be dismissive of it. Test how contrarian your risk analysis really is by sharing the details with your network and gauging how people react.
• Consult your network to do reference checks on the people associated with whatever risk you’re evaluating. People risk is the most important risk to get a handle on.

And remember: If you don’t find risk, risk will find you.

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Please share in the comments section: What are risks you’ve taken that have paid off?

Text adapted from my book with Ben Casnocha: The Startup of You: Adapt, Take Risks, Grow Your Network, and Transform Your Career (Currency, an imprint of Random House, 2022).