research<\/a> by neuroscientist Michael L.\u00a0 Platt, professor at Wharton at the University of Pennsylvania.\u00a0 I am also going to try to differentiate his work on gambling versus my assessment of risk in both business and personal terms.<\/p>\nPlatt makes five key observations:<\/p>\n
Risk-taking evolved as a survival tool
\nModern betting apps are built for speed, amplifying impulsive decision-making
\nCelebrity endorsements reduce caution
\nNarrow equilibrium just enough wins to keep you in the game
\nPsychological vulnerabilities tied to loneliness and impulsivity<\/p>\n
Platt also states that testosterone in men makes them more likely to \u201cdesire luxury goods and take wild gambles.\u201d\u00a0 That may explain why men buy 70% of the luxury timepieces.\u00a0 After all, status isn\u2019t cheap.\u00a0 Platt\u2019s main research focuses on gambling and casinos but the problem of risk is systemic across all decision-making processes.\u00a0\u00a0<\/p>\n
I have a friend who is a private banker.\u00a0 He is terrific.\u00a0 The bank he works for (in my humble opinion) is second-rate in customer service.\u00a0 He tells me that he is often head-hunted and could make more money at another institution but he has a family and a mortgage and does not want to take the risk.\u00a0 That is not an unreasonable point of view.\u00a0 Many of us prefer the devil we know rather than the one lurking outside a different conference room.\u00a0 I make no judgments.\u00a0 I am simply telling a story.\u00a0\u00a0<\/p>\n
This dilemma is universal.\u00a0 Leave this spouse for a better one or a better job or a better house or a better \u2026\u00a0 Again, in fairness, we are a capitalist society, so we are always free to shop our value and roam for a better deal.<\/p>\n
Another friend (yes, I know it is amazing that I have more than one) is president of a big company ($800 million in revenue).\u00a0 He goes to the recent board meeting and points out that there are several losing operations that should be jettisoned so the company can focus on growth in areas where they excel.<\/p>\n
The board members nod and appear to agree.\u00a0 But they are afraid of giving up the few million in revenue by cutting anything.\u00a0 What will replace the gap?\u00a0 Of course, a new focus on the right things will drive new revenue.\u00a0 But initially there will be a gap.\u00a0\u00a0<\/p>\n
There are countless stories of great companies shedding nonessential divisions to focus on the best ones.\u00a0 Seems obvious.\u00a0 But they stalled.\u00a0 Discuss at next board meeting.\u00a0 Kicking and cans.<\/p>\n
The key is how to assess risk.\u00a0 Let\u2019s go back to gambling.\u00a0 Billy Walters, probably the greatest sports gambler in history, wrote a book, \u201cGambler: Secrets from a Life at Risk,\u201d which is required reading if you feel the need to put some risk in your life.<\/p>\n
To just break even, you need to be right 52.38% of the time.\u00a0 Billy was at 57%.\u00a0 Just five little points was all that was needed to make multiple millions.\u00a0 \u00a0<\/p>\n
Now, move from sports betting to the more mundane art \u2013 poker.\u00a0 There are a dozen great books on the subject.\u00a0 But again, \u201conly about 2-5% of poker players make significant money.\u201d\u00a0 I have another friend, a general contractor, who plays every Tuesday, and loses $100 most nights.\u00a0 About the same as a fancy dinner and a movie.<\/p>\n
Now, let\u2019s look at the problem of scale.\u00a0 A friend and I are considering some litigation.\u00a0 We are unhappy at a certain behavior by a venture investor.\u00a0 How good is our claim? Is it a worthwhile contingency play or pay the lawyer by the hour?\u00a0 Even if you win, will you ever get paid?\u00a0<\/p>\n
Over 40+ years of deal-making, I have looked at a lot of risks.\u00a0 My confession is that the single most lethal risk is the risk of waiting too long.<\/p>\n
I have known the right answer frequently, but I hesitated or I rationalized or I hoped or I couldn\u2019t for a hundred reasons. \u00a0 Think back on your best and your worst decisions.\u00a0 They all had an element of risk.\u00a0\u00a0<\/p>\n
You can\u2019t pick your parents, but after your first good yelp out of the womb, the rest is on you.\u00a0\u00a0<\/p>\n
Measure risk wisely.\u00a0 Suffer the small losses for the biggest wins.<\/p>\n
Rule No.\u00a0 837: \u00a0 Flush beats a straight \u2014 most of the time.<\/p>\n
Senturia is a serial entrepreneur who invests in startups. Please email ideas to neil@blackbirdv.com<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"I am fascinated by risk and how people measure it.\u00a0\u00a0 Initially I am going to draw on research…\n","protected":false},"author":2,"featured_media":441997,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[28],"tags":[387,2087,74,76,75],"class_list":["post-441996","post","type-post","status-publish","format-standard","has-post-thumbnail","category-san-diego","tag-business","tag-business-columns","tag-san-diego","tag-san-diego-headlines","tag-san-diego-news"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/441996","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/comments?post=441996"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/441996\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media\/441997"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media?parent=441996"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/categories?post=441996"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/tags?post=441996"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}