One of our favorite blogs is Seth’s Blog, by Seth Godin. Seth Godin is an author and speaker who writes for the business world. A recent blog article by Seth Godin dealt with risk, both apparent risk and actual risk. Godin spoke mostly about apparent risk:
The concierge at a fancy hotel spends her time helping tourists and business travelers avoid apparent risk. She’ll book the boring, defensible, consistent tour, not the crazy guy who’s actually a trained architect and a dissident. She’ll recommend the restaurant from Zagats, not from Chowhound…(1)
In this case, the apparent risk is the unfamiliar versus the tried and true. The “the tourists in New York who seek out the familiar Olive Garden instead of walking down the street to Pure (a cutting-edge raw-foods and vegetarian restaurant featuring “Caper Lemon Roasted Chanterelle Mushroom with Truffle Creamed Broccoli” and “White Corn Tamales with Raw Cacao Mole”).*
Seth goes on to say that “Apparent risk is avoiding the chance that people will laugh at you and instead backing yourself into the very real possibility that you’re going to become obsolete or irrelevant.” The apparent risk is embarrassment; the actual risk is obsolescence. Many people would choose the former.
At Barnes & Conti, we’ve identified a third type of risk which we call an “intelligent-risk.” An intelligent risk is not easy to define, but it does meet certain criteria:
- The potential gain is worth the potential loss
- The risk is well-considered; implications and consequences have been thought through
- The level of risk is actively managed… The odds are in your favor to begin with or you have adjusted risk factors to increase the probability of success or to decrease the probability of negative consequences to an acceptable level. (2)
Let’s take the example of food for a moment. Seth’s “apparently risky” restaurant features wild mushrooms. I understand there are people who don’t like mushrooms at all; let’s forget about them for the time being. An actual risk is that many wild mushrooms are poisonous; the apparent risk is that wild mushrooms—even served in a restaurant—are foreign, unknown. What about an intelligent risk?
I’ve been known to gather wild mushrooms on occasion. I focused on two types of mushrooms that I could easily identify. I also learned what—if any—their poisonous look alike mushrooms were, and learned how to tell them apart. Does this meet the criteria for an intelligent risk? The gain: free, tasty wild mushrooms, is worth more to me than no mushrooms. The risk, poisonous mushrooms, has been considered. Risk is managed by focusing on mushrooms I know well, so the odds are very much in my favor.
As much as I love mushrooms, I can recognize that intelligent risks have a much broader and more valuable application in the business world. Barnes & Conti has developed a program entitled Intelligent Risk-Taking. This program helps participants identify their risk taking style, and sets out a process for taking intelligent risks. In today’s business world, where the buzz is still about innovation, it’s more important than ever to have an intelligent risk-taking process in place.
(1) “Apparent risk and actual risk” by Seth Godin, from Seth’s Blog, October 12, 2009
(2) Intelligent Risk-Taking, by Barnes & Conti, copyright 1987, 2004.