Growing up, nine year old Bimbo always heard his enterprising father say ‘qui ne risque rien, n’a rien et qui n’a rien n’est rien (this could be translated as, ‘to take no risks is to have nothing, and to have nothing is to be nothing’).
Bimbo did not quite get the point at the time, because he was still dependent on the weekly allowances his dutiful father gave to him. Yes, Bimbo was quite aware that his father, a serial entrepreneur often got very pensive, especially when he needs to take a major decision destined to change the trajectory of his business. For instance, each time his father wanted to introduce a new product into an already existing market or when he perceives the possibility of creating a new market altogether he became quiet and thought creatively.
Financial risks come in different shapes, sizes and shades and seasoned risk-takers seem to do things differently from the rest of the pack. Financial risks induce fears and worries, making a great majority to avoid them. It is probably time to have a look at what risk-takers do differently from risk-avoiders, which in turn makes the former category of individuals much more economically productive and successful.
Thomas J. Stanley, PH.D., in his fact-based book ‘The Millionaire Mind’ analysed the responses from a sample 1, 001 respondent, of which 733 were millionaires. The balance was high-income-producing people who were not millionaires. These high-income, lower net worth respondents were the most risk averse – in general terms, they were spenders, not investors. They believed that having a high income earned them the title of ‘economically successful.’ These people were more likely to state that it was their superior IQ and intellect that accounts for their economic success, rather than financial risk taking and the courage that accompanies it.
Stanley’s studies found that “overall, there is an inverse relationship between taking financial risks and various measures of analytical intelligence such as SAT scores” he wrote. While others talked about their superior intellect, the typical financial risk taker has significant amounts of practical and creative intellect. This corroborates Robert Sternberg’s study on the mix of wisdom, intelligence and creativity. Stenberg is IBM Professor of Psychology and Education and Director of the Centre for the Psychology of Abilities, Competencies, and Expertise at Yale University.
What risk takers lack on the analytical side, they compensate for by hiring high-grade advisers, by studying and analysing a great deal of financial literature, and by recognising opportunities that others ignore. These skills are the product of creative intellect, coupled with a practical mind-set and common sense. Some of the techniques used by seasoned risk-takers are described below.
