Risk, Reward and ROI

Alternately titled: Life and Love from a Finance perspective.

There are three major considerations made when considering a decision. They are the biggest three of many thousands of considerations ranging from inconsequential but worth pondering to game-changing.

What is the risk? This is where that whole worst case scenario generator proves its mettle. After qualifying comes quantifying. How likely is the worst case scenario to occur? What is the margin of error on that calculation? Where is the break even point? What is the acceptable outcome range? Is the current general climate favorable; are you swimming upstream or riding a steady gentle current? My personal favorite is risk tolerance; even if it’s a good risk, are you willing to take it? Can you handle the uncertainty?

After careful examination of what you stand to lose and how likely you are to lose it comes the fun part. Reward. What is the reward? What is the best case scenario? How worthy a pursuit is this reward? Is this reward trivial or significant? This is where you’re supposed to ask yourself if you’re considering an opportunity because you want the reward or because you want to win, but most people don’t.

The information gathered on these first two issues are then used to calculate a return on investment projection. What are you getting out for what you are putting in? How will you know when you’re in the red or happily flush in the black? Is the sacrifice- time, labor, allocation of capital that could be used elsewhere or left in its current form- reasonable compared with the risk and the reward? Is it a responsible and justifiable investment?

Determining all of this is hard enough when you have a few gigs of data and most of the information is concrete. Translating this process to the abstract is a mind-fuck on its best day. Due diligence is hard to fulfill without spreadsheets and percentages and line graph charts, and that makes it all too easy for your loyal mind to justify your heart’s fevered wish.

At the end of the day, though, both processes have the same bottom line. Can I afford to lose my ass on this deal under the worst case scenario? Which seems to mean that perhaps risk tolerance is the highest ranking factor in the calculation.

As for my own tolerance, I’ve always been a fan of the well-timed calculated risk. I’m more of an intuitive decision maker than an analytical type, particularly in the face of soft data. The conflict of these two parts of myself often leaves me at an impasse: believing without knowing, wondering if that is enough, and wishing for the courage and confidence to believe in things that cannot be wholly seen on a physical and literal plane. As I build faith in my own ability and strength, risks that seemed too dangerous have started to lose their edge.

Finally, I’m beginning to understand that the movers and shakers of this world take huge risks because they have an inherent belief and faith in their ability to withstand loss and replace what they lose if that’s what it comes down to. They look at the high-risk high-payoff opportunities and dare to dream, because in the end they know they are mostly betting on their own ability to rebuild if something goes horribly wrong. The more they lose and recover, the more bold they become.

I can’t help but feel as if I’m in the process of becoming who I was meant to be in this world in every imaginable way.  Those collective experiences seem to be preparing me to believe in myself enough to search for something I can’t see; the world seems to be saying that it believes in me, and how do I dare not return the favor?

Is love so fragile…
And the heart so hollow
Shatter with words…
Impossible to follow
You’re saying I’m fragile… I try not to be
I search only… for something I can’t see

I have my own life… and I am stronger
Than you know
But I carry this feeling
When you walked into my house
That you won’t be walking out the door
Still I carry this feeling
When you walked into my house
That you won’t be walking out the door
- stevie nicks, “leather and lace”

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