You’ve got to know when to hold ’em
Know when to fold ’em
Know when to walk away
Know when to run
— Kenny Rogers, The Gambler
You’ll have to pardon me if I lack a certain entrepreneurial spirit. After a few spectacular flame-outs I’ve lost my taste for risk for the time being. Given what has happened in our economy it would be hard to blame anyone for being a little gunshy right now.
In fact when I see people taking big chances I believe that I actually panic vicariously through them.
Risk is not merely a financial concept either…there are many types of risks. You risk your life whenever you get behind the wheel of a car. You risk your health whenever you eat an indulgent meal. You risk injury whenever you play a sport. And you risk your sanity when you enter a relationship of any kind on any level.
Some of these risks are unavoidable — or at least they are less risky than the alternative. For example, if you never get behind the wheel of a car then you might never get to work, and you stand a much greater risk of financial distress. So risk is also relative.
That brings me to a dilemma. How do you know when it’s worthwhile to take a big risk? Is it when you stand to receive an excellent payoff? Is it when you are confident that you can win? Is it when you become desperate and have nothing of value left to lose?
And if you’ve already taken the plunge, how do you know when to call it quits? Do you quit while you’re ahead? Do you give up when you’ve lost more than you can afford to lose? Do you stop when you realize you’ve become addicted to the intoxicating rush of it all?
Just as many investors are sitting on the sidelines and staying out of the stock market I am also trying to insulate myself from a risky environment.