We gamble all the time, but we don’t think of it that way.
We think we are making decisions, not gambling – and often don’t see it as taking risk either.
But we are.
The key is whether we are making what we consider a “sure bet”, where we believe the outcomes of our decisions are more likely than not to be (net) favorable, considering both the upside and downside – especially compared to the alternatives.
When I quit my job with Coopers & Lybrand in the UK and decided to move to the US, I was gambling.
- I had no assurance that I would get a job in the US (although I was fairly confident), and certainly had no assurance it would be a job I would want. As it happened, while I wanted to move back to Atlanta, the job I was offered was in Los Angeles.
- I didn’t think I had a future in my current position. As it happened, I had been tagged as potential partner material.
- I was also gambling that I would enjoy life in the US. I had spent nine months in the US and had made many friends, but would I be happy in this foreign country? Would I miss the safety of being close to my family in England?
- I made what I considered to be an intelligent and informed decision. As it happened, my assessment of the facts was partially incorrect (I probably did have a future if I had stayed), but it turned out well for me.
Every time after that, when I took a new job I was gambling.
- In most cases, my old job was disappearing due to downsizing or an acquisition. But in some cases, I had been offered a position with the acquiring company. My assessment was that it was better to leave than stay.
- While I had done as much research as I could on my new company, I didn’t have certainty about its prospects or the people I would work with. In one case (Solectron), nothing was as it appeared during the hiring process – but that’s another story.
- Again, I made what I considered an intelligent and informed decision but had no certainty that it would turn out well.
When we gamble, whether we call it making a decision or taking a risk, it is crucial that we try to do so intelligently and with all the quality information we can obtain.
At college, I played poker with a lot of success. But I didn’t consider it gambling as I knew that I was one of only two players at the table who knew what they were doing. I was taking risk, but my assessment was that I was far more likely to win than lose and my potential loss was smaller than my potential gain.
Quality information informs and enables quality decisions.
The military planners deciding whether to send troops to rescue hostages in Iran (under Carter) or to capture Al Qaeda leaders (under Obama), would have had to assess:
- The likelihood of loss of personnel and equipment. There was a range of possible levels of loss, from the embarrassment of a failed mission to the loss of the whole team. Each level of loss had its own likelihood.
- The likelihood of success. That also was a range, from partial (such as rescuing a few hostages) to full (bringing them all home). Each level of success had its own likelihood.
- The possibility that their assessments of loss and success were incorrect.
- Whether the likelihood of success warranted taking the risk of failure. That was the gamble they made.
- Were they gambling when they decided to go ahead? There was no certainty about either the potential and likelihood of loss or the potential and likelihood of success.
What does this mean for the risk practitioner?
Their job is to help the decision-makers make informed decisions and take risks with the knowledge that they are more likely to succeed than fail.
After all, it is only by taking risks that any organization can achieve its objectives and succeed.
The risk practitioner has the ability to help decision-makers assess the extent and likelihood of a range or potential outcomes, both potential losses and gains.
The risk practitioner can improve the likelihood of quality decisions and therefore of success.
Is it gambling when you have what you believe to be reliable information and are making an intelligent decision?
It’s certainly gambling when decisions are made in haste without reliable information on the extent and likelihood of what might happen.
I welcome your thoughts.
He retired in early 2013. However,he still blogs, writes, trains, and speaks – and mentors individuals and organizations when he can.