Take Risks, But Do It Wisely

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If you are a businessman, you will understand this: taking risks is a fundamental part of running an enterprise. If you are not willing to seize opportunities and bet thoughtfully on future growth, you are probably just not meant to be an entrepreneur or a decision maker in a bigger company.

That being said, the assumption of risk is a much more tricky matter than it might seem at first sight. As it goes, we live in a highly complex universe with an enormous number of economic actors. And so what seems absolutely logical from the standpoint of a small entrepreneur turns out to be much less obvious for people who act within the framework of a big organization. Taking risks is of course still a must. However, the attribution of responsibility that comes along with it is much less clear in these cases.

Thus, complex economic systems oftentimes produce significant asymmetries when it comes to assuming responsibility for wrong decisions. The most flagrant case of such a disconnection in recent history happened in the 2008 crash, when banks were bailed out after extremely risky decisions that turned out to be a disaster.

For a business to work properly it is absolutely necessary that this connection be fairly strong. Recently, the American-Lebanese economist Nassim Nicholas Taleb has analyzed this connection in his book Skin In The Game. As he points out, a disconnection between taking risks and assuming responsibility can prove very dysfunctional to the economy. If decision makers don’t have to fear negative consequences of their actions, they will act lightheadedly and take unjustifiable risks that might put in danger millions of people.

And while most of us won’t be able to change the way the whole economic system works, we can at least take care of our own businesses. The best way to do so is learning the right way to take risks – and never forget that the last laugh is on you.

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