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Learn how to weigh up opportunity and risk
Tuesday, 21 February 2006
Every sensible person lives with one eye on the future. We go to work so we can get paid next week, we go to school so our life chances improve, we try to anticipate bad things that may happen so we can avoid them, we invest in the future in the hope it will pay off. But of course, the time and resources we have to invest in the future are limited. We can't take every opportunity available to us, so we must choose carefully. And with every choice, we take the risk of loss.
Because we live so much of our lives investing in the future, whether it's money, time, or worry we're spending, it's important that we be able to work out the probability of our investment working out as we hoped. Nobody - and I repeat NOBODY - knows what the future is going to look like. From a baby in a cradle to the smartest and best paid consultant on the planet, we all have to take our chances. And most of the time things don't turn out the way we expect them to.
For an eye-opening experience, go to your local library one day and read through newspapers and magazines from a few years ago. A big chunk of popular media deals with the future. Pundits predict on everything - from the economy, to elections, to technology, to music, to fashion.
We're all so focussed on what's going to happen tomorrow, that we forget to go back and check how the predictions of the past turned out. Often they're wrong, wrong wrong. Sometimes laughably so.
What does this tell us?
That predicting what's going to happen tomorrow or next year is hard. Whether it's our own lives,the lives of those around us, the economy, or the nation, events have a habit of surprising us. Sometimes that surprise can be pleasant - an investment can make us much more money than we imagined. Sometimes the surprise can be horrible - someone near to us chooses to leave.
What else do the many predictions in the media tell us?
That being right about what's going to happen is a very valuable commodity. If you can accurately predict who will win next year's Superbowl, that's worth a lot of money. If you know which stocks are going to perform well, you can retire rich. If you know which skills will be in demand four years from now, you can train for a lucrative career.
But even outside the area of money, being able to predict events is very valuable. Think of the number of times you would have made different relationship decisions if you had known what was going to happen next.
None of us can be right about the future all the time or even most of the time. But the better we get at predicting it, the easier our lives will likely be.
So train yourself to weigh up the opportunities and risks in the various situations you face. Before making any important decision ask yourself these questions:
- What could go right?
- What could go wrong?
- What is the most likely outcome?
Don't spend too much time stressing over these questions. Remember, nobody knows for sure what is going to happen, so crippling yourself with doubt and worry is pointless.
Just come up with the first answers that pop into your mind. Write them down if necessary, and then act on what you think will be the most likely outcome.
Some time after the events in question has occurred, come back to the answers and compare what you thought could and would happen to what actually did.
If you were wrong, why? If you were right, why? Try to assess what you thought would happen and what actually happened as critically as possible.
If you develop the habit of doing this, you will greatly improve your opportunity and risk assessing skills. These are some of the best skills to have in building success.
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