The Three Sides of Risk

never take a risk that will do you in completely.

Sensing that money was starting to slip through his fingers, the client developed an aversion to loss that was strikingly similar to Van Zanten’s. Like the captain who was preoccupied with getting back on schedule, the investor was blindly focused on getting back to even. Jordan realized that his client was so eager to make up for a loss that he wa

An important cousin of room for error is what I call optimism bias in risk-taking, or “Russian roulette should statistically work” syndrome: An attachment to favorable odds when the downside is unacceptable in any circumstances.

The more extreme the outcome, the less likely you can apply its lessons to your own life, because the more likely the outcome was influenced by extreme ends of luck or risk.

The idea is that you have to take risk to get ahead, but no risk that can wipe you out is ever worth taking. The odds are in your favor when playing Russian roulette. But the downside is not worth the potential upside. There is no margin of safety that can compensate for the risk.