Why Growth Requires Risk and the Kind of Risk That Creates Growth

The ability to take risks is one of the things that separates the real winners from the also-rans

Whenever growth is discussed, whether in business or in our personal lives, the importance of taking risks is mentioned. And when we talk about risks, there is sometimes confusion between risk and gambling.

Dr. Henry Cloud in his book, Integrity, defines risk as follows:

Risk means that you do something that has the possibility of a bad outcome, and that you embrace the possibility and are OK with it.

He goes on to say that financial risk means that you invest your money in some way in which it is not certain that all will be good, but there is also the possibility for a greater reward than if you had done something more secure.

When we talk about taking risks, all it means is that you are exposed. It does not mean you’re foolish or careless. It does not mean that the chance that things will go badly is much higher than the chance that things will go well — this is gambling, not risk.

As Dr. Cloud writes…

“Successful people take ‘risks’ in other people’s minds, not really so much in their own. Other people look at them and see them investing, or beginning a business, or undertaking some venture, or going out on their own, and think of that as taking a lot of risk. What it really means is that they have put themselves in the position of responsibility. If there is not a good outcome, it will rest on their shoulders. Risk is merely taking a move away from structured security where someone else has to worry about the results.”

Think of a full-time employee earning a fairly safe six-figure salary. She decides to leave her job to start her own business. Everyone around her will consider her decision to venture out on her own as very risky. If she has done her homework before starting her business, she will not consider this risky. Instead, she has exposed herself to the possibility of taking home a salary from her business that is less than the six-figure salary she’s getting from her former employer. And she’s OK with this outcome. She’s willing to take responsibility for a less than an expected outcome.

She has moved away from the structured security she enjoyed with her former employer where the employer and shareholders (or owners of the business) had to worry about the outcome or results from the business. Her responsibility in her position as an employee was only limited to fulfilling her job mandate, nothing more.

What successful people do that others consider risky is usually not risky. Rather, it is very calculated. As Dr. Cloud writes, they are expressing themselves in the ways that they have already grown and learned, but in a new way or arena.

The good ones learn something and grow to a point where what they are doing can no longer contain all that they have become. So, they just step out and take the next step. They have grown and are ready to take a further step to express the amount of ability that they have developed and that step creates even more. Stepping out is not a risk. It is an expression of who someone has become, even if he or she is not sure of the outcome.

Dr. Cloud uses an example of a toddler to illustrate this point further. He writes, when a toddler takes her first steps, it is not as dangerous as if she had tried it earlier. It is an expression of the strength that has been gained already, and although the result is unclear, and she might fall down, she is ready to take the step. You can call it risky, but it is really something she is ready to do. Then, as a result of taking that risk, new growth happens.

When a very good friend of mine ventured into investing in commercial real estate, I personally considered it risky, and so did others that know him. But, he was ready for it.

And how did I know, now in hindsight, that he was ready?

1. He invested $20,000 to hire a coach — someone that has done many commercial real estate deals — to teach him all he knew about commercial real estate investing; to hold his hand while he searched, negotiated and bought his first commercial real estate property; and to guide him and provide him with wisdom in his new venture in the world of commercial real estate investing.
2. He had successfully invested in many residential real estate deals and had some related experience in the residential side that can be transferred to the commercial side of the business.
3. He read many books on commercial real estate investing that prepared him for this new venture.

By taking these steps, he was expressing the growth that he had accumulated in the years he spent investing in residential real estate and now stepping out in a natural progression to commercial real estate investing.

My friend was not gambling when he went into commercial real estate. Instead, he took a calculated risk. Gambling would have been someone who had no experience in real estate or a related field, who did not hire a coach or mentor, and who did not read books to learn the ins and out of the business. This is not what successful people do.

Dr. Cloud summarizes this appropriately when he writes:

Successful people grow as a course of things, then break out of the skins that are holding them back. They do not attempt things that they have no reason to believe they can do, if there is a lot at stake. They attempt things they have never done when they are in the learning mode, but not the investing mode.

According to Dr. Cloud, “Risk taking is an important dynamic to growth. It means that someone is putting himself in a position of exposure, where he can be hurt. But, that is really just a synonym for being alive. It is risky to drive down the freeway, in that definition. But, if you are going to function, you have to do it. You have to get out there to get somewhere.”

If you want to grow, you must be comfortable taking incremental risks. You start small, master one thing, and then move on to the next step. As you do that, you grow. By doing this, you’re putting yourself out there, conquering fear in the process as you have developed the character and resources to withstand possible negative outcomes as you expose yourself.

Final Thoughts

In order to grow, you must take risks. You must take the step to the next level past where you are comfortable.

But risk that creates growth is the kind that is a natural expression of what someone has already become, not some foolish leap into oblivion. In other words, you must be in a place where you’re ready to take the next step, the calculated next step.

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