Taking Risks

This is a post that has a beginning but no end.  I think one of the lessons I've taken away from the past year is the importance of taking calculated risks in your career.  Looking back, I can think of 3 key moments that involved some fairly significant level of risk: 1. quitting my job at the bank without anything lined up.  2. taking a temp job as a 30+ yr old MBA grad, potentially permanently depressing my future earning capacity.  3. Holding off on taking an analyst position that was offered to me in the hopes of getting a manager role. (risk of coming up empty on both).

Looking back, there were also some significant risk mitigators. 1. Yes, I quit my job, but I was married and my wife had a high-paying job, so we weren't in danger of suffering financially.  2. Yes, I was taking a temp job, but I was also unemployed at the time, so making some money over making nothing seemed reasonable.  3. Yes, I was taking a risk at passing up an analyst position, but I figured I could get some analyst position elsewhere eventually, given my education and experience.

Summary: There were risks, but they weren't as big as they initially seemed, but even still, if I didn't take those risks, I wouldn't be where I am today.  And where I am today is working for a company I like more than my old job.  Working with people that I like more than my old job.  Being able to see myself in this career longer than in my old job.  Being more excited about the work content than my old job.  Getting paid less than my old job, but also working proportionally less hours than my old job, which allows me to do other things in life that I value and enjoy.  I'm much less stressed and much more happier than I was a year ago.  I do not have the benefit of looking into the future and seeing how things all pan out.  But early indications are that it's hard to say anything but just to admit that things worked out very well.

It's also very important to note that my agency in what transpired was minimal compared to God's agency and others' agency.  Yet, it is still important to stress that we have a major part to play.  We only have one life, so we better live it the best we can.

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I was looking back at an old e-mail from an old friend I received back when I was thinking of quitting my job in banking, and here's a summary of what he wrote back to me:

1. There's wisdom in refocusing your career earlier than later; the longer you wait, the more difficult it gets - and your soul dies in the process.
2. Don't minimize the importance of affinity, but don't overemphasize it either.  Your personality  affects what tendency you should likely avoid.
3. Don't do anything that creates an inner-deadness.
4. Be courageous.  More often than not, our inability to make decisions has less to do with ignorance and more to do with fear.
5. Seek community input
6. Consider how much other lifestyle pre-decisions have factored into your vocational decision.

Looking back, this was one of many valuable advice I received in helping me process my thoughts.

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Just today, I was talking with a friend about how we're in our early 30s now, and we and a lot of our friends are at a stage in our lives where we face real challenging decisions, decisions that involve closing doors of opportunities, making real tradeoffs with consequences, making real sacrifices in career  or family, etc.  When we were high school, the biggest decision was what college to go to.  In college, the biggest decision was which job to take.  And in our early-mid 20s, the decisions was about going to grad school, or taking a better job, or moving to a new city.  These choices always involved risk and they still exist for us in our 30s.  But back then, it didn't seem risky. It always felt like you could just turn around if you wanted.  But now, the consequences seem more permanent and the impact wider in scope.  Now, the consequences are not just different alternatives of fabulous.  Now, they involve starting over, taking steps back, closing certain doors, etc.  Now, it's decisions like: do I take a step back in my career in support of my husband/wife?  Do I take a step back in my career to take care of a child or two?  Do I take a step back to take care of my parents for a period of time?  If I start over in my career, am I throwing away everything I did over the last 10 years?  Now, the risks seem more real.

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I wish I remember this better, but one of the key lessons from behavioral finance is the existence of loss aversion.  The pain that most people feel about losing x is far greater than the joy they feel about gaining x.  So this results in a severe risk aversion in many people that is somewhat irrational.  And perhaps there is an opportunity to really benefit if we had the ability to see risks and their corresponding rewards more rationally.

This isn't a post to unequivocally encourage everyone to take more risks.  But in general, assuming reasonable outcomes like low-risk/low-reward and high-risk/high-reward, if our tendency is to be much more risk adverse than we should be, then perhaps there's tremendous opportunity for those of us who can stomach more risk than we otherwise might have taken.  And particularly for those of us who are younger and can absorb the potential downside outcomes that may occur.

Of course, another lesson of behavioral finance is the presence of confirmation bias. So where does this leave us?