DERISK YOUR LIFE BY TAKING RISKS
On what having options should mean in our life
Reading from Hameed’s newsletter, he talked about how to de-risk your life, do things to reduce risks, and create safety nets for yourself.
On the other hand, Erik writes, taking asymmetric risks is what we have to do. Asymmetric risks are risks with an unlimited upside in a success case and meaningful learning or development in a downside.
They both agree on optionality.
Taking risks with limited downside gives you more options. However, optimising for optionality and following the safe path continuously without ever taking an asymmetric bet is like spending your whole life filling the gas tank without ever driving.
Mehir writes on optionality, the emphasis on creating optionality can backfire in surprising ways. Instead of enabling young people to take on risks and make choices, acquiring options becomes habitual.
Acquiring options becomes an end instead of a means to an end.
Going back to Hameed’s argument, we have to make choices that reduce risk and create more options for ourselves. The concluding part of the idea would be “but in doing so we have to make sure we know our end goal. What are you creating the safety nets for?
To Erik’s argument, don’t create options to be safe; you become a turkey.* Take risks at that have a capped downside and an unlimited upside.
CONCLUSION
To sum it all up, the two arguments are one side of the same coin. You have to derisk your life to take asymmetric risks. Don’t create options for the sake of creating options. (similar to working for work sake).
You may want to create safety nets that allow you to take asymmetric risks in the future by evaluating risk and opportunity trade-off.
*The turkey is an analogy of a person who expects good times always. The farmer feeds the turkey every day, so the turkey thinks the farmer loves it and would continue to feed it every day. The farmer does indeed feed the turkey up until Thanksgiving. This concept is from Nassim Taleb’s book Black Swan Read Taylor Pearson’s article on Job stability. The story of the turkey is told better by Morgan O’Rourke here
