How To Take Calculated Risks In Business

Bird on FenceIn the Spring of 2007, there were rumors that Randy Moss was available for trade.

Moss had been one of the most successful wide receivers in NFL history, but was coming off two less-than-stellar seasons in Oakland and he had two remaining years on a contract that had very high salaries. Plus the trade would include a draft choice.

Moss also possessed some personality traits that clashed with certain people: coaches, executives, other players and more.

Two teams showed real interest: the Patriots and the Packers.

The Patriots wound up making the deal. Moss would go on to have one of the greatest seasons in history. The Patriots offense was one of the most successful of all time. They nearly went undefeated before losing a heart-breaking Super Bowl.

Also, by the way, the Packers had a resurgent season in 2007 losing in the NFC Championship game.

A Calculated Risk

It’s interesting that the Patriots and the Packers were the two teams that showed interest. The teams met in the 1996 Super Bowl. Since then they have become two of the most consistently winning teams in the league.

Why were these teams the only two that showed interest in Randy Moss?

In the NFL you can pretty much bank on the fact that losing teams do what losing teams do and winning teams do what winning teams do. It’s very difficult for the momentum to change for good or for bad.

The Patriots (and to a lesser extent, the Packers) saw Moss has a calculated risk. One with relatively low downside, but with potentially HUGE upside.

That’s what winning teams do. That’s what winners do in life in general. Period.

Acquiring Randy Moss cost the Patriots a 4th round pick and roughly $3 million that first season. A 4th round pick and $3 million are a lot, but if Moss had flamed out the loss wouldn’t have crippled the Patriots. But every other team wasn’t willing to take the risk.

A Pattern Of Success

The Patriots continue to take these kinds of risks. And it’s actually interesting that most of the time the risks fail. Albert Haynesworth. Chad Johnson. Antonio Brown. A number of others. But they keep taking calculated risks. Ones with relatively low risk compared to the potentially extreme reward.

You could even say that the biggest calculated risk in Patriots history was deciding to play Tom Brady even after Drew Bledsoe recovered from injury. Bledsoe had signed the biggest contract in NFL history in the Spring of 2001. He got hurt. Brady played well. The team went on a run. The Patriots continued to play Brady. Then Brady was hurt in the AFC Championship Game. Beldsoe played well. They made the Super Bowl and Brady led the team to the win.

At the time, you’re playing a second-year player that lacks physical traits over a purebred NFL quarterback with tons of experience.

But what’s the risk? Brady plays bad. So what. Put Bledsoe back in and move on.

Final Thoughts: How To…

It’s easy to misunderstand risk in the business world. But it’s one thing that sets successful businesspeople apart. They take relatively small risks and aren’t embarrassed when they don’t work out. They move on. They’re willing to do that because once in awhile you hit big. REALLY big.

The mistake that many make is taking big risks for big payoff. In that case you’re betting a lot, an amount that could cripple you, for a potential big payoff. It might work out, but often it doesn’t and then you’re screwed. That’s what bad NFL teams do when they overspend in free agency.

The key to taking calculated risks is simple, but it’s not easy. It’s seeing situations where nearly everyone else is undervaluing an opportunity. It’s seeing a situation where you can completely fail, but not be crippled when the potential payout is huge.

You have to look for these opportunities. You have to be willing to take them. You have to be willing to deal with the failure. And you need the discipline to say “no” when the price becomes so high that losing cripples you. Because when you’re crippled you’re out of the game. When you lose a little you can still continue playing while still looking for new calculated risks.

Did you enjoy this article? Get new articles weekly.

Popular Topics

Online Marketing
Entrepreneur
Sales
Leadership
Life

Search