Why Your Threshold For Risk Is Different Than Mine

Threshold

Imagine an opportunity of a lifetime that will afford you everything you ever wanted sits in front of you right now.

Freedom

Flexibility

Financial Security

Worldwide Travel

Working from Home

Being Your Own Boss

“Joel, what’s the catch? This has got to be too good to be true.”

Not only does the opportunity only have a 40% success rate, if it fails you lose everything you. On top of that, you must make your decision right now.

Will you take it?

5 years ago, I would’ve said no.

Chances are, you do most things in life with the intention to minimize and/or avoid ‘risk’. Here’s why.

risk theoryThe ‘risk’ theory

The ‘risk’ theory says that ‘risk’ is a measurable concept that lives in our minds. In its essence, ‘risk’ is based purely on the standards or measures that we set for it.

Knowing this, what would happen if the numbers and guidelines that you have set for it, didn’t exist?

Unfortunately, the ‘risk’ theory is not perfect. It does not allow for the projections of all the bad things that might happen during any sort of project or event.

The ‘utility’ theory.

This theory states that we are not actually averse to ‘risk’ but rather we are averse to the possibility of different outcomes.

If we apply this theory to money, then a $100.00 bill is worth more to someone who has less money than someone who has more money. If we then gave these two people a chance that would see them either double the money if successful or lose it completely if it fails, the person with less money would be less inclined to ‘risk’ the chance.

Or…

Imagine you are at the beach with your child and they are making a sand castle. To the right of them is another child doing the same. Your child looks over at the other child and notices that his castle is smaller. Without a second thought, he makes an offer that goes something like this:

“I will race you to the tree and back. If you beat me, you can have all the sand from my castle to make your small castle bigger. However, if I win, I will take your sand to make my large castle bigger.”

The child thinks about the deal and decides that the potential loss of their sand is far greater than the potential gain of the other sand.

I am sure that you realize that ‘risk’ is not avoidable, however, what you may not know is that it is controllable.

‘Risk’ management

‘Risk’ Management is defined as: “the practice of identifying potential risks in advance, analyzing them and taking precautionary steps to reduce/curb the risk.”

The governments do their best to manage ‘risk’ through the street signs and speed limits they set as we drive around. These limits and signs are designed to promote safe driving and ensure that the ‘risks’ involved while in a car are significantly lowered.

Don’t let this fool you.

You and I both know that the rules will be broken. Just yesterday I found myself driving 63 in a 60 and yes, I have blown through a stop sign.

Knowing this, ask yourself, “How much ‘risk’ am I able to live with?”

Threshold is the key

A threshold is defined as, “the point at which a stimulus is of sufficient intensity to begin to produce an effect.”

The threshold for ‘risk’ differs from person to person and your aversion to ‘risk’ might be high when it comes to jumping out of a plane, and lower when you jay-walk across the street.

With this in mind, understand that there is no universal threshold set for ‘risk’.

How much ‘risk’ you can handle?

Dog eating ice cream

Testing the threshold

Picture a dog and imagine eating dinner at a table. Is the dog at your feet? Probably, so you shoo him away.

Slowly, over the next 10 minutes, you notice that he is now within 5 feet of the table. Seeing how close he is, the dog decides that he can ‘risk’ getting closer and inches his way to within 2 feet.

Now, you catch him.

At this moment the dog understands that the ‘risk’ of him getting caught lies somewhere between 2 and 5 feet. To play it safe in the future he will never come closer than 3 feet.

Much like our friend the dog, you must knowingly test your limits to gain an understanding of your threshold for ‘risk’.

What’s the worst that could happen?

Tony Robbins said it best,

“If you don’t set a baseline standard for what you’ll accept in life, you’ll find it’s easy to slip into behaviors and attitudes or a quality of life that’s far below what you deserve.”

I am going to add to that with,

“If you don’t stop making every attempt to mitigate ‘risk’ and instead, embrace it, you will live a life filled with regret.”

Besides, what’s the worst that could happen? You find yourself exactly where you are right now?

Cheers to your success,

Joel

Join the private conversation and get updates by email.

Subscribe to the mailing list:
JOIN NOW
About Joel Scott 70 Articles
I am a family man first and foremost. Everything that I do is for my family. They keep me focused and moving forward. My purpose in life is to help as many people as possible...and then help a few more. When I'm not doing that, I can be found drawing, writing, exercising, reading, deep in thought, and expanding my real estate portfolio.

Leave a Reply

1 Comment on "Why Your Threshold For Risk Is Different Than Mine"

Notify of
avatar
Sort by:   newest | oldest | most voted
trackback

[…] in the entrepreneurial world. They, just like you and I are human and as humans, there is a set threshold as to how much we can […]

wpDiscuz

Before You Go, Take My Book With You

Get Everything You Want In Life
1. How to overcome risk

2. How to get others to do what you want

3. Which books you should read right now

​4. How to become the person you want to be

​5. What you can do right NOW to get you there

 
Perfect, Thanks
Joel a Scott
Join the private conversation and get updates by email.

Subscribe to the mailing list:
JOIN NOW

Enter To Win

Enter For Your Chance To Win A Copy Of The Two Books That Changed My Life
Enter
Enter To Win