What Is Risk?

Source: Photo by Riley McCullough on Unsplash

During the 2020 NFL free agency period, Tom Brady, the famed quarterback of the New England Patriots, 3-time MVP, and 5-time world champion, decided to leave the only franchise he’d ever known. The move changed the hierarchy of the league, leaving a gaping hole for a former dynasty, and giving hope to a listless Tampa Bay franchise Brady agreed to join.

But was it the right decision? The answer is yet to be determined, and it depends on whose viewpoint you want to take. No matter whose perspective, one thing is for certain: his decision comes with risk.

What is Risk, Really?

What happens when you make a decision? Can you know—with absolute certainty—what the outcome will be? In all but a few cases, the answer is no. There is almost always some amount of variability in what could occur.

Let’s take the mundane example of deciding to go grab some bread. Ideally, you go walk into a Costco and come out with a loaf of Dempster’s whole wheat. But what if the store you’ve gone to has run out? You could walk out with no bread, or you could choose a different brand, or maybe a different type of bread. You could also choose to try and find bread at another store.

Even with such a simple example, with one desired outcome, more than one result could happen. The stakes aren’t enormous, but it’s important to realize that this outcome variability—also known as risk—is ever-present.

Risk researchers define risk as outcome variance. This is just a succinct way of saying that risk is present if more than one outcome can occur. And it’s important to note that risk is almost always there. Researchers run experiments with controlled outcome variability, but whether it’s getting bread, or deciding on where to work, we cannot know with absolute certainty what the future holds in real life.

This applies to football legends as much as it does to everyone else. Tom Brady cannot know if his choice was “the right” choice. The Tampa Bay Buccaneers appear to be the better situation for Brady from a football perspective. But injuries, fallouts with a new coaching staff, and difficulties with moving to a new city could all contribute to a worse experience for the future Hall of Famer. That’s the downside of risk.

There’s also the upside possibilities. Tom Brady could have an incredible new connection with his teammates and they could go on to win multiple championships. The saying “no risk, no reward” is cliché, but that doesn’t mean it doesn’t hold weight.

The point of this article isn’t to say that you should avoid risk. First of all, avoiding risk is impossible. But secondly, if you make yourself aware of the possible outcomes of your actions, you can make better, more informed decisions. If you don’t understand what risks you’re taking, you’re just guessing at what to do. And even though you’ll never be able to account for every possible outcome, making the effort to try is an important step in any decision-making process.

Especially if it involves something more substantial than bread.