History Remembers the Risk-takers

I wrote on this topic some time ago, but I still think about it often, and wanted to share my thoughts on it:

In 2004, Mark Zuckerberg, Sean Parker, and Dustin Moskovitz moved into a house in Silicon Valley. In a rather amusing play, they offered to pay rent in Facebook stock, rather than in dollars. You can probably guess that the stock they offered is now worth far more than the money paid in rent. Did the homeowner take that leap with them? Nope.

History remembers the risk-takers.

That reality may push you to take risks, but it can also be a warning to do just the opposite. It’s a warning that bias may be affecting your decision.

We've all heard stories of risks that paid off hugely, or the ones that would've, had they been taken. But that's just the thing, we only hear about that small share of risks that should’ve been taken. We don't hear about the risks gone bad. We see the iceberg above the surface, not the vastness below. We hear little of the renter who actually did accept stock, and got nothing but worthless equity and a lost rent payment.

I should note that these risks are often asymmetrical. Decline the offer, and you could potentially miss out on a stock worth millions. Accept, and you may just miss a month’s payment. But the odds are also asymmetrical. It’s a low chance the stock goes to the moon, and a high one that you forego much-needed monthly income. Such is the game of risk. As long as you understand this, you’ll likely be okay to take a few here and there. Life is far too boring when risks are never taken.

I’m not at all here to be a pessimist, to put down the belief you may have in a budding company or opportunity. I’m writing this from an iPhone… a device that was born out of a company built on leaps of faith and long odds.

I get it. People don’t love reading the cautious take on the topic. It’s not exhilarating, cool, or inspiring. But it’s worth remembering when you’re talking yourself into that leap of faith. Maybe it’ll turn out a good call, but make that call for the right reasons. Don’t fall victim to survivorship bias. Throw off the blinders.