Building Your Wings on the Way Down

And while you’re at it, it'd be worth your while learning to play Hold 'Em poker too, writes Aaron Brown

Ray Bradbury famously defined “living at risk” as jumping off a cliff and building your wings on the way down. Too many financial risk managers who came late to the field think of risk as a passive bad thing to be minimized, an unfortunate by-product of profit-making activities, like air pollution, neckties or meetings. Ray understood that risk can be chosen and managed actively. Sometimes the value of being the first one off the cliff outweighs the risk of not getting your wings finished on time (and, in this case, not in time means not at all).

It would be foolish to jump off the cliff without being prepared to make wings. Obvious as that is, another common mistake is to choose a risk without also selecting a management strategy that gives it a chance of success. Some people have the wisdom to see this without bitter experience, the self-knowledge to pick strategies within their capacities and the discipline to adhere to plan. Or maybe not. I’ve never met one. I do meet a lot of people who never choose risk, a lot who choose risk without a strategy and a lot who apply a fixed strategy to all types of risks. The few who either select risks appropriate to their preferred strategy, or who have mastered a range of strategies so they have the right approach for any risk they happen to select, learned how to manage risk the hard way.

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