Learn To Balance Calculative Versus Speculative Risks

As you read the heading, we are sure you are wondering whether article is going to be about investments and how to manage them. We don’t blame you for thinking that way and you are not completely wrong for thinking that way because what is life if not an investment? But when it comes to seeing life as an investment, then we mean that you need to invest a lot of quality inputs to get the returns that you expect from life. It also means that life is not without risks and in many situations, you will be called upon to take risks. Those of us who hesitate in taking risks may not end up losing a lot but this also means that we will end up not making much. At the same time, taking risks is something that one needs to do with care and deliberation to get the results that you desire from life.

If you are not already clear on this, we would like to reiterate that life is all about balance and one will need to balance risk taking with caution in a very fine balance.

woman in offce

What Better Way To Explain This Than With An Example? Here Is One:

Sarah was an upcoming executive in a big company. At 28, she had everything going; money, looks, career, parental support, a good social life and plenty of friends. She had worked hard to be where she was and it was all coming around. She was happy to go about her life when two important events happened.

One was a friend of hers who had studied in MIT and had come up with an innovative product. Phineas, her friend was keen to start his own company and was seeking investments from friends. When he approached Sarah, she was a bit hesitant but when she heard his whole proposal out, she was inclined to take the risk. But being the sensible lady that she was, she ran the proposal by her father who was quite good with numbers. Her father explained that though there was a chance that this venture could fail, the chances of success were more.  Since Sarah was still young and could afford to invest half her savings in this, she should go ahead and do it. Even if the venture failed there would be a good chance that she would be able to recoup her losses in the future by continuing to save. Sarah thought about it and decided to give her friend the money.

The above example is that of a calculated risk; Sarah thought, investigated, consulted, and went ahead but only to the extent of half her savings.

Let us look at the major event – This was more in the nature of a romantic change in her life with the entry of Lucas in her life. Lucas was a handsome and very wealthy man who dealt in buying and selling antiques. Introduced by a mutual friend, Sarah found herself swooning at the immense charms of Lucas. Soon they were inseparable and would spend most of their free evenings and weekends together. As time passed, Lucas insisted that she spend lesser times with her friends and more time with her and since Sarah was totally consumed by her love and attraction for him, she agreed. What is more, her friends also seemed to be uncomfortable with Lucas. Things came to a head, when one day she had to break a date with Lucas to go and visit Phineas as he was in an accident.

couple fightng 2

Though Sarah had called and informed Lucas about this, he seemed to be a bit put off by the whole thing, the next time they met. After an evening that fraught with anger and resentment, Sarah decided that enough was enough and told, Lucas to stop sulking and that she had a right to help her friends when she needed them. Hearing this Lucas got so angry that he simply lifted his hand and slapped her across the face. Hurt and scared, Sarah left the place in tears. The next day, Lucas came to her house with flowers and a sorry face and apologized. He explained that he was very possessive of her and hated to think of her spending time with anyone but him. He also asked Sarah to marry him. Though something within her heart was warning her against this, Sarah agreed.

She related this to her friends and they told her not to go ahead with the relationship and that she was taking a risk by marrying a guy who believes in physical violence. Sarah however, argued that with her love and understanding, Lucas would change and he would become an ideal husband and soon they got married.

man and woman discussing

As you can imagine, her life became hell; Lucas was possessive and would soon not bear to see Sarah spending time with anyone but him. Soon things became so bad that she lost her friends, lost touch with her family and one day, she lost her job too. As Sarah contemplated the ruin of her life in just three years, she got a call from Phineas. Her investment had paid off and that too big time. At that point, she realized that in life there are calculative and speculative risks. Investing in Phineas’s Company was a calculative risk that had paid off and investing in her relationship had been a speculative risk and it had made her miserable. She should have recognized the signs of verbal and emotional abuse long before in her relationship with Lucas and should have left, but it was never too late.

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