Are You Giving Up Big Rewards over Small Risks?
Book: Tools of Titans – Tim Ferriss
Concept: Fear Setting
“You miss 100% of the shots you don’t take” – Wayne Gretzky
Very often, I see very smart people overestimate risk. The smarter you are, the more prone you will be to this mistake.
The “less smart” among us, God bless them, don’t even realize that their idea shouldn’t work. So, they barrel ahead. And, they often succeed! Meanwhile, while the “smart” people took no action, and had no success, because they fretted about some potential risk.
Nothing worth doing is risk-free. Therefore, the only people who ever succeed in any big way are the ones who are willing to face their fear and take risks.
But, how do we do this? How do we overcome our Fear? If this is not naturally in your DNA (and for most of us, it is not), you need practical tools to face and defeat fear, so, that you can move forward and reach your potential. My favorite tool for defeating Fear comes from Tim Ferriss: Fear Setting.
“What’s the worst that can happen?”
Fear Setting, at its most basic level, is simply defining the worst case scenario for whatever action you are considering. An action always seems the most risky, and often seems outright catastrophic, when its downside is undefined in your mind.
Once you define the actual risk, you will often find the risk is nowhere near as bad as it once seemed. Once clarified, the downside that we once so feared often turns out to be a minor bump in the road of our lives. Meanwhile, the potential upside of taking action could be huge.
Tim once described this in a podcast as follows:
We often pass up opportunities that could be, on a scale of 10, a permanent 8, 9, or 10 type of positive outcome… because of fear of what is really only a temporary 2 or 3 type of potential downside.
Once we start thinking of our decisions in this way, instead of obsessing over cloudy ideas of all the things that could go wrong, we will be much more open to taking risks.
An Example of Fear Setting
Starting your own business sounds scary. It feels like, if you do it, your life could be over if you fail. The truth, however, is that, if you fail, you are usually just out some time and money.
If things don’t work out, maybe you get behind on some bills. Maybe some things are temporarily bad for you financially. Maybe you leave the business in credit card debt.
But, you still have food to eat. You still have a home. You can always just go back and get another job working for someone else. In Gary Vaynerchuk’s words, “The practical world is always waiting with open arms”.
When all is said and done, this outcome is a “2” or “3” on the scale of bad things that can happen to us in our lives. And, it’s temporary. You go back to what you were doing before, maybe you have some debt to work off, but, you recover and life goes on.
But, if your own business worked out, maybe your life is altered in a positive way for years. Maybe you achieve fulfillment and you are happy. Maybe money ceases to be a concern. You are setting your own schedule, you’re your own boss. This is maybe a 7 or 8 on a scale of positive events and this is a potentially permanent development.
Starting your own business is only one example. You could use the same exercise for taking a new job, moving to a new city, starting a band, writing a book. When I go through this exercise I am often surprised to find that, for many things I held back from doing, I was really more held back more by fear of potential embarrassment of “failing” than actual material loss.
The Art of Fear Setting
Take a piece of paper and draw vertical lines to divide it into thirds.
- On the left side, “define” your fears by writing down all the things that could realistically go wrong with whatever action you are considering taking.
- In the middle, “prevent” your fears by writing down ways to prevent that particular defined fear from occurring.
- On the right side, “repair” your fears by writing down ways to “fix it” if the fear happens.
“Cap the downside” is a term you will hear Tim mention often. For each of these bad things, is there a way you lower the chance of it happening? Or minimize the damage if it does? Is there a way to fix it if happens?
Maybe the fear is, “I might go in the hole $15,000 by starting this business and failing”. How could you prevent that? Can you negotiate terms to lower your risk? For repair, how could you earn the money back if it happens?
Simply going through this exercise will help to free your mind from your fears. Fear Setting is one of the most powerful tools that I have found to get comfortable with taking risks. Give it a shot the next time you are faced with a big decision.
You might be surprised to find that you are bypassing a chance at a “10” positive outcome over fear of a “2” negative outcome.
UPDATE: You can learn more straight from Tim at his blog by reading his post on Fear Setting by clicking here. It’s a great post and I heartily recommend it, any of Tim’s books, and his podcast.
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