A friend in finance shared this article from a friend of his about “The Three Sides of Risk” with the key take away–that knowing the worst-case, even if the chance that it happens is small–is among the most important things to know when deciding to take action. Seems like a good lesson beyond investing.
From the piece:
Never, not once, did we think we’d pay the ultimate price.
But once you go through something like that, you realize that the tail-end consequences – the low-probability, high-impact events – are all that matter.
In investing, the average consequences of risk make up most of the daily news headlines. But the tail-end consequences of risk – like pandemics, and depressions – are what make the pages of history books. They’re all that matter. They’re all you should focus on. We spent the last decade debating whether economic risk meant the Federal Reserve set interest rates at 0.25% or 0.5%. Then 36 million people lost their jobs in two months because of a virus. It’s absurd.
Tail-end events are all that matter.
Once you experience it, you’ll never think otherwise.