You Get Paid in Proportion to Your Risk

0:00above your intelligence, above your work ethic, you'll be compensated in proportion to your risk. Pro tip: If you're afraid to take the risk, write down in excruciating detail what you're actually afraid of happening, step by step, what happens next when you fail. You'll often find it's not so bad when you spell it out. Fear exists in the vague, not the specific.

0:29So risk comes in a handful of flavors. One is what we know we will give up that we hope we will get something back from that's bigger. There's also the we want something bigger but we will pay a cost. So different ways of saying the same thing like it's going to be uh lose something good get something bad >> um are the are the things that risk presents for us

0:58>> a different view on risk that I've been thinking a lot about is proportionality of risk and at the most basic level this is a lot of what you know investing really is which is there is always risk but is the risk priced appropriately and Peter Thiel had this comment commentary around Elon where if he had just had one of his three companies succeed, it would have already been a crazy win. But somehow he got all three of them to become, I guess now, you know, multi-billion trillion dollar plus companies.

1:28And he said he must know something about risk that all of us don't understand. And I think there's something incredibly powerful about studying the person who's accumulated the most wealth in history, or at least in present day. Um, and that that man's understanding of risk is different and it's probably a more accurate view of true risk rather than perceived risk. And he often talks about like, well, the downside of trying as hard as you can is basically nothing. You are, if you're in the developed world, the likelihood that you starve to death is almost nothing. And there are there is free shelter if literally no one in your social construct would allow you to crash on a couch. And that assumes that during the day you are incapable of working in any way that generates money which there are many ways to generate money that do not require tremendous skill at least today.

2:12>> And so the downside is nothing. And so that is why the risk of going after whatever it is that you want is mispriced by the vast majority of people because they have this fear of the big thing that's good that's going to go away or a big bad thing that's going to come as a result. But the big bad thing is nothing. But the big thing that's good that they miss out on is everything.

2:36>> And so the risk is almost always mispriced because our brains are wired to mispric it because if you mess up once, you don't pass on your genes and you die. But it is in no way wired to maximize your potential and what you're capable of. This mismatch between ancient programming and the modern world is kind of hilarious. We got a nervous system that was built to fight bears and now it's worried by group texts. [laughter] Uh it's true. It's true. And uh how do you think about Let me add one more piece on that risk piece. Um I was talking to an entrepreneur um a week or two ago and she had grown her great-g grandandmother's business from 4 million to 44 million in 3 years. She was like, "Awesome, super cool story." And it became obvious to her that her brand and needing to create more content was kind of the constraint of her going from call it 45 million to, you know, 200 million and beyond. And she said, "Okay, so do you think I should like hire an editor?"

3:38And was interesting, she's like, "Well, how much is that going to cost?" And so the business is doing a million month profit now. And what was interesting to me is that often times we don't also recalibrate our appetite for risk as our exposure to opportunity expands. >> And so you right now are still operating from the $4 million business owner risk angle where you were making a million a year and one or two editors was 10 or 20% of your net income. when you're making $12 million in profit, we should be thinking about how do we make a 23 $4 million bet that we think is going to result in an extra 200 million or 100 million on top of that, which is a phenomenal return. And so, I mean, I open up the offers book with one of my top two quotes from Jeff Bezos when he talks about how if you have a 10% chance of a 100 of a 100x payoff, you should take that bet every time knowing that you will be wrong nine times out of 10.

4:36The difficulty with that example contrasted with reality is that if you were at a casino and you had a 10% chance of a 100x payoff, of course you should take that bet, but then just assume that the minimum bet is 10 years and you only have three hands to play. >> Yeah.

4:59>> And that's the reality of life. That said, when we look at what that loss of that 10% when that 10% when the 90% of the time that it fails isn't actually a loss though, >> you've accumulated a lot along the way. >> Yeah. And you get you've gained experience, you've gained lessons, you've gained skills, you've gained network, you've gained relationships, um perspective, and so you only move forward by taking these shots on goal. And I think that if every risk was only seen as zero downside only upside and either I win or I learn, which we are not the first people to say that, but whatever version of that narrative you need in order to realize that life has given you an endless amount of scratchoff tickets and you just get have to cash them in.

5:45>> I think that more people would take bets and more people would win. If you like this video and you're a business owner who wants to break through your current revenue ceiling, I distilled every lesson from scaling 10 businesses past 10 million and three businesses past 100 million into a completely free scaling road map that I've used to go from 0 to 1, 0 to 10, and 0 to 100 plus. And so you can click here and you can check it out. Again, absolutely free. And since you're a business owner, appreciate you and uh enjoy.