Justin Britten

A Simple Formula for Evaluating Risk

Having been on the startup roller-coaster for over two years a lot of people assume I have a high tolerance for risk.  I don’t.  However, I do have a fairly simple formula for evaluating any situation in my life.

    Given the scenario, can you bear the worst possible outcome?

It’s not rocket-science.  Most people over-complicate their risk evaluation by either immediately withdrawing out of fear, or spending hours enumerating the pros and cons.

Take a situation where you’re about to part with $10,000.  What is the worst possible outcome?  Perhaps it’s that you lose the $10k.  So, what does that mean?  Perhaps it won’t affect you at all.  Maybe it will sting, but life will go on.  Maybe it means that you’ll homeless and forced to sell your car.  Maybe it means some thug will break your legs.  Or, maybe the money doesn’t matter, but your reputation is on the line.  Either way, define the worst possible outcome and answer the question, “can you bear it?”