Evaluate the risk

- One of the most important steps in taking risk is evaluating risk, and this one can take a period of time and should take a period of time. So the first time I really thought about evaluating a risk, a professional risk in particular, is when I was being offered the director of research job at Sanford Bernstein. I had a great job. I was a research analyst, I was covering Wall Street, I was covering the big banks. I don't know that I thought I could do it for the rest of my life, but I thought I could do it for a lot of the rest of my life. And then my boss at the time came to me and said, would you like to be director of research? My first reaction was, I'd like to be associate director of research. And the reason I wanted to be associate director of research was the risk just wasn't as great. That there was a colleague of mine, I thought he'd be a great director of research, and he'd be Batman and I would be Robin, and he would make the tough decisions and he would set the strategic direction and I would give him my opinion and I would help him execute, and that seemed super fine to me. Well the truth is, that wasn't the job that was on offer, and the first time I really sat down and thought about, I'm about to take a career risk here, I can say yes or I can say no to it, was when that director of research job was on offer. I happen to have some pretty good training for this, and it's training that I almost recommend to every young person if they have the opportunity, which is become a research analyst. Sexy, I know. But the reason being a research analyst is a great job and particularly a sell side research analyst is I was, in that job, able to do what all of us need to do when evaluating risks, which is take a set of imperfect information, in the case of the research analyst, information from suppliers, distrubutors, customers, management, what the economy was doing, pull them together, put together a mosaic for myself, figure it out, take a risk, in the case of a research analyst, buy or sell recommendation on the stock, and then succeed or fail in public. That's essentially what I was doing as I thought about this professional risk. And what I did as I thought about the professional risk is what I would urge all of you to do, which is I sat down, in this case with a glass of wine. What did I know? What was my upside, what was my downside? And get it all out. My upside, new challenge, new opportunity. I could work with the research analyst and make them better. I could have the opportunity to build the greatest research department on Wall Street. I could learn a whole bunch of new stuff because I'd be working with different industries than I was before. That was the upside. Downside? Failure, embarrassment, maybe the analysts who were my friends wouldn't like me as much, and laying those out. And so what I recommend for all of you as you're thinking about the risk that you're taking, and particularly those career risks or moving to become an entrepreneur, is getting it out. Sitting down, I found for me, first thing in the morning when I was a little bit hazy so all my defenses weren't up, in the evening, glass of wine, all the defenses came down. Laying out the upside, laying out the downside, letting it sit for a few days, thinking about how those feel to you for a while, then really laying out what taking on that risk means to you. If you can do that, if you can get it out, if you can then get it on a piece of paper, if you can then start to socialize that with and debate it with friends, family, people who know you, your personal board of directors, as you do that you'll put yourself in much better shape to evaluate a risk.