Risk or Ruin: Which Risks Are Worth Taking?

Fear is an emotional signal that helps us avoid danger. However, distinguishing between a serious threat and an uncomfortable setback is a tricky task, as both can make us afraid. That fear can lead us to avoid risks that are instrumental to our long-term success in business and life. This article draws a distinction between risks we can recover from and risks that take away our chance to try again.

Defining Ruin

Risk involves both the possibility of loss and how much that loss would matter. A certain kind of loss deserves particular caution: one that leaves you unable to meet essential obligations or continue pursuing your goal. That is what I mean by "ruin."

For example, if you have a net worth of $100,000, betting all of it for a chance to win $1 billion could be disastrous if the odds are 1 in 20, even though the expected payout is $50 million (1/20 × $1 billion), before subtracting the stake. In 19 out of 20 cases, you would end up with zero net worth. If those savings are what you depend on to live, losing them could make further attempts impossible for a long time. An attractive average payout does not tell you whether you can live with the likely loss.

The same concern applies to concentrating your career in one employer-specific process without developing transferable skills. Losing that job would not necessarily be ruin, but it could leave you with few alternatives just when you need them. Risks that threaten your survival in the game can deprive you of the chance to try again. Risks worth considering have downsides you can reasonably assess and absorb. Then ask whether the likelihood and size of the possible reward justify the cost.

Risks Worth Taking

Starting something new, creating, and forming new relationships can all offer this kind of opportunity when you keep the commitment manageable. We often avoid meeting new people or embarking on new adventures because rejection feels larger in our imagination than it may prove to be. For example, public speaking is a common fear, even though an awkward speech usually leaves us able to try again. The upside can be substantial: one good speech may create opportunities that several awkward attempts did not.

A musician can produce many works, improve along the way, and give each one a chance to find an audience. Worthwhile risks leave room for repeated attempts and the chance to win big once. You can pitch your start-up idea to 100 investors and hear "no" 99 times. One "yes" may be enough to fund the next stage.

A simplified calculation shows why keeping the next attempt possible matters. If you had 100 independent tries, each with a 1% chance of winning, the probability of winning at least once would be about 63.4%. Here's the math:

• P(win at least once) = 1 − P(not winning in 100 tries) = 1 − 0.99^100 ≈ 63.4%
• The probability of not winning in 100 tries is 0.99^100.
• The probability of not winning on a single try is 1 − 0.01 = 0.99.

These assumptions matter. Investor pitches and creative projects do not come with fixed, independent odds: several attempts can fail for the same reason. The calculation also says nothing about whether a win would cover the cost of all those attempts. Learn from each result, and consider the total cost before deciding to keep going.

Take Risks, Avoid Ruin

Fear can make a temporary setback feel like a permanent defeat. As Seneca wrote in Letter 13, "We suffer more often in imagination than in reality." We are creatures of imagination, but that same imagination can hinder us from taking action by bringing the image of ruin to the forefront of our minds. If you want to accomplish something, start making small bets with high potential upsides, even when you still feel afraid. Keep both the individual bets and their combined cost small enough to preserve your options. Remember, life is a long-term game, and to keep playing that game, you must survive first. Take risks, avoid ruin.