Rethinking Risk.

As financial advisor Carl Richards says, “Risk is what’s left over after you think you’ve thought of everything.” That’s the real definition of risk—what’s left over after you’ve prepared for the risks you can imagine. Risk is what you don’t see.

One way to think about smart risk taking is that people are willing to extract lessons from whatever results or nonresults they produce, getting smarter because they took the risk. Each successive experiment thus becomes informed and smarter because of the previous effort.

Risk is the price of a return. Risk is a measure of probability, the likelihood of gaining or losing money. There is no investment without risk, so be sure the potential return justifies the level of risk.

Risk is not something to be avoided at all costs; rather, it’s something we need to understand, analyze, and work with.

Running many small risks is less risky than running a few big ones. So encouraging widespread risk taking, particularly with small experiments from which lessons are captured quickly, is in the medium run a safer strategy.

I believe the major risk facing most efforts is value risk.