Defining Risk

One of my candidates turned down an offer from our client this past week. The position was remote, and he instead took a position with a local firm, with a lower salary, for a variety of reasons, but the one that seemed to stand out was that he felt more comfortable with a firm close by, a team to work with, and people that he knew. All good reasons for sure. And all the more understandable since he was the in the job market due to a layoff at his prior employer.

I got the impression that it seemed a 'safer' choice to him than the opportunity I presented.

But it got me thinking about risk. For example, people typically view stocks, bonds, commodities, etc as 'riskier' than savings accounts, CD's and other insured deposits. However, financial advisors frequently point out, that there is another type of risk with insured investments, and that is the risk that these 'safe' investments will generate lower returns over time (say 3 or 4% annually), than stocks or bonds, which might generate 5-10%. The risk is that when you retire, you may end up with substantially less with a 'safe' investment, than with a 'risky' one.

The same can be true of career considerations. Taking the safe career path, avoiding the risk of failure, may seem the safer route, certainly more comfortable for many. But after years of looking at resumes, you rarely see executives, business owners, or investors who usually took the 'safe' route. They almost always took risks, took them regularly, and usually made some mistakes along the way. But they typically identified those quickly, made adjustments, and moved on.

In this day of frequent and often surprise corporate acquisitions, divestitures, expansions, contractions, bankruptcies, etc, becoming accustomed to risk and being able to assess it quickly and accurately may be one of the greatest assets a person can have. Seemingly 'safe' choices can turn out not to be, sometimes surprisingly quickly. As with investing, you may find upon retirement that having consistently taken the 'safe' path throughout your career, may not leave you as well off as having taken more risks along the way.