Risk...

Risk is often thought to be a four letter word in the figurative sense. I have begun to realize lately that I do not understand its meaning at all.

To some, taking a risk means trying out a new cuisine, or buying an unknown brand of computer. To others, risk taking means investing in equity markets or taking a large loan. To some, it means trying out an alternate career path, like entrepreneurship or a job in a start up. To yet others, risk means the possibility of losing your life or that of your loved ones to illness, accidents or acts of God.

I always think of risk as a probability - what is the likelihood of a certain (unfavourable) event happening? Being a numerical person, I boil everything down to numbers. However, this does not work too often. This is because I can never choose between (as an example) 2 risks - a very small chance of a very big loss or a somewhat probably chance of a medium sized loss. In other words, a walking person could fall into a very narrow but very deep well, or he could fall into a bigger diameter hole that is not too deep. How does one choose between the two?

Whenever I think of risk I automatically think of money and career. But if I ask myself honestly, how important are these? Education, a growing economy, a simple lifestyle and a belief in the dignity of labour really should minimize typical risks on this front. On the other hand, risks of illness, life or limb are the ones that one should worry about. I think we are wired in certain ways - we cannot do much about un-influence-able events like cancer or earthquakes, so we do not worry about those risks. However, we can influence individual career / money decisions to a large extent, and so worry all the time about these, even though they may be really low priority in the larger scheme of things.

I watched with morbid fascination videos of the tsunami engulfing towns in Japan last week. I was thinking of the guy driving his car, trying to outrun the irresistible water. What if the guy had got a bad appraisal from his boss last week and was worried about his job? What if he had a loan coming due shortly with no funds to pay it off? Did it really matter?

I understand that events like this are one offs and not commonplace. But the bigger question still remains - does one spend more time trying to minimize the very small risk of loss of life, or the medium probability risk of not being extremely wealthy?

I still haven't figured out the answer!