In the investment business we spend a lot of time talking about risk. As it applies to portfolio construction and management it is a decades-long debate: how to structure, how to measure, how to optimize. Academics and asset allocators keep the debate going each and every day, testing and honing their models in hopes of finding even the slightest of edges.
But…that’s not real risk.
I was lucky enough to be a graduate of Leadership Charlotte, a city-wide leadership program. The Executive Director, Elizabeth McKee, would often punctuate her talks to the class with the question, ‘remember; what is real risk?’
She was reminding us to remain vulnerable as leaders and drop the walls that we all assemble. To get to know someone as a person first, not a title. I think what Elizabeth emphasized is just a form of opportunity cost. If we stayed behind our walls, hiding behind the business card and never letting others into our world, so many opportunities for ideas and relationships would be missed.
In an excellent piece on risk management, Morgan Housel pointed to this as an example of regret minimization and ‘good risk:’
“Good risks are those that you will both regret not taking and won’t regret if they backfire.”
I like to call this the ‘say yes’ rule – yes to the job offer, yes to the travel, yes to the opportunity, yes to the date. Just say yes. It’s an example of disproportionate risk-taking – the downside is fairly limited, but the payoff could be amazing.
But…it’s still not real risk…
Todd Hage was an old co-worker of mine. Gregarious with flaming red hair, he was smart, engaging, and fun. He assessed banking risk for a living, and he was damn good at it.
Todd was a Navy veteran and a volunteer firefighter in his spare time, that’s just the kind of guy he was. He lived to serve others.
On an August afternoon in 2007 Todd responded to a routine fire alarm at a new elementary school that hadn’t even opened yet. Todd was driving a firetruck by himself when the truck flipped navigating a tricky curve. He was killed instantly, and left behind his wife and two young children. He was 42.
People don’t spend a lot of time thinking about real risk because the day-to-day details of life don’t require it. We’re safe, we have food on our tables, we kiss our kids and hug our spouses. There’s never an imminent threat, the modern world has permitted us an expectation of a long life. But real risks are always there.
Like leaving your house and family to go serve your community and never coming home.
Loss of health. Loss of loved ones. Loss of life.
Financial advisors are definitely obsessed with portfolio risk, but our true value lies in the conversations about real risk. This is why real financial advisors emphasize an estate plan, emergency savings, life insurance, and disability or long-term care. We discuss values, and goals, and what clients hope the world looks like when they leave it.
If you haven’t tackled these things, if you haven’t faced down your worst fears and become truly aware that nothing in our lives is guaranteed, you owe it to yourself and your family to do that today.
My friend Ashby Daniels wrote the other day, “Knowing and understanding that life is short can be the best catalyst to cause us to take action in our lives today.”
I would argue life gets even better once you’re intimate with the idea that things can all go away, and fast. Pursuing a well-lived life knowing that you’ve controlled what you can control lets the worry fade away and true peace to emerge.
As Casey Mullooly courageously explained in this recent discussion of his fresh cancer diagnosis:
“It has taught me that happiness shouldn’t depend on how you’re feeling. Happiness is not contingent, it is always there.”
This past month was heartbreaking in my little corner of the world.
I’m a member of a local cancer support group. It’s for ‘Young Adults,’ but they’ve been gracious enough to allow me to slide in anyway.
In the last month we’ve lost two members, folks I was fortunate to get to know over the last year. They fought their ass off and remained cheerful and strong, supporting other members just as much along the way. Cancer won anyway.
Then a man walked into a synagogue a few miles from my house and gunned down 11 innocent people.
This post wasn’t easy to write; talking about death and disease always sucks. The message is that real risk is always around, but no one rings a bell to let you know it’s about to change your life. Find an advisor, have a conversation about the practical changes you can make to take away its power, and a freer, happier lifestyle can emerge. I’m hopeful that writing something like this and putting it out into the world is one small way to do that.
If not us, then who? – Todd Hage