What is Risk? This Formula Will Explain Everything
I’m just starting to come back to life after two weeks with the flu. In between the fever-induced hallucinations and general mutterings of a mad man, it gave me the opportunity to think about risk in another light.
Why did I get sick? Most people fall ill, get better, and hope it never happens again. There’s little more thought applied to the situation. Fingers crossed!
But there’s actually a very good reason I got sick, and you can trace the path I took pretty clearly. In fact, it follows a simple line of logic:
- My immune system is being suppressed by intense marathon training. That makes me susceptible to illness.
- I had not received a flu shot. There’s another opportunity for illness to strike.
- There was a bug going around, and a number of my friends had it. This is a threat to my health.
- I exposed myself to a group of people who were showing early signs of the flu. This practically guaranteed I was going to get sick.
- Bam. I got the flu.
There was a high threat of the flu at the same time that I was particularly vulnerable to it.
It’s obvious when you think about it. And you can apply this same line of logic to a simple equation and use it every day in your own life when you’re assessing risk:
Risk = Threat x Vulnerability
If the threat is high, and you’ve done nothing to mitigate it, you’re at great risk. But if the threat is high and you’ve done everything you can to prepare for it, then your risk is, at worst, average and, at best, low. And if the threat is low and you’re incredibly prepared, well, you’ve probably wasted time, money, and energy where it could have been better spent.
How can you apply a formula like this to your own life? Read on to find out.
Just like the article I wrote about the Smart Risk Equation, this isn’t the kind of equation you can objectively plug numbers into and find some sort of solution that applies to everyone everywhere, but it is a fantastic guide for thinking about and comparing the risks that exist in your own life and what to do about them. (This formula makes a perfect companion for the smart risk equation.)
Let’s take a look at a few different real-life scenarios and how to handle them.
Flu Season: High Risk = High Threat x High Vulnerability
My own case of getting the flu is a great example of a high risk that I should have worked harder to avoid (by lowering my vulnerability).
I know that when I train for a marathon, my immune system is suppressed by the intense workouts. I also know that not having a flu shot makes me more susceptible to getting the flu.
Put these two things together, and I should be very aware my vulnerability to illness is high.
Now, add in the fact there’s a virus going around, and a number of people I know and interact with have it. That makes my threat level high.
In any situation, I can’t control the threat—that’s independent of me. But I could certainly control my vulnerability through the actions I take.
For instance, I could quarantine myself from large groups and friends who are sick. I could stop drinking alcohol while training (alcohol adds to illness vulnerability). I could also adjust my diet and start taking immunity boosting supplements to help make up for the training that’s lowering it.
All of these things would have helped to lower my risk by reducing my vulnerability.
Of course, the easiest thing to do would be to quit training, but that’s not an acceptable option for me. As a Smart Riskologist, you know that the best course of action is the one that lowers your vulnerability to risk without sacrificing the goal you’re trying to achieve. What’s the point of lowering your risk if you sacrifice the thing you’re trying to protect yourself from?
Web Hackers: Low Risk = Low Threat x Low Vulnerability
If you’ve ever run a website, you’ve probably had it hacked before. You wake up one morning to find your website replaced with some bizarre new creation, often porn (if the hackers are just jokesters) or a political message (if they’re activists).
Every website on the Internet has some level of threat of being hacked, but the vast majority of them have a low threat because they don’t receive enough traffic or are not controversial enough to draw the attention of hackers. Most serious hackers have high ambitions and seek to take down big websites.
Riskology.co is a popular blog, but it’s small potatoes in terms of popularity over the whole Internet. There are far more people looking at cat pictures right now than reading this article (unfortunately).
So, this site has a low threat level. But because I’ve had one of my sites hacked before and had to deal with the headaches that come with cleaning up a mess like that, I employ some of the simpler precautions I can to avoid hacking.
I don’t have to spend a lot of time or money going overboard with security because the simple solutions keep the weekend warriors at bay, and none of the serious hackers that could get around my defenses care enough to try.
In this situation, I’ve matched my threat level (low) with a corresponding response—simple vulnerability precautions to take care of most threats.
As a Smart Riskologist, you’ll want to do the same. Where you see a low but prevalent threat in your life, you should take the basic measures to avoid the most common problems. This applies to healthcare, diet, exercise, car insurance, relationships, and many other facets of daily life.
Tornadoes in New York: No Risk = No Threat x High Vulnerability
While it’s a good principle to never say never, it’s also important to point out that there are lots of situations in your life where essentially no threat exists, and it’s perfectly fine to be highly vulnerable (zero times a million is still zero).
I mention it because, as humans, we’re all unfortunately very susceptible to Chicken Little Syndrome.
A perfect example of this is the sometimes over-the-top response people take to terrorism. I can’t speak for the whole world—some places have a higher threat than others—but for the average American, the real threat of a terrorist attack is infinitesimally low.
Yet, it’s such a sensational topic that we seem to spend every waking second talking about it on every news outlet across The U.S. Even when nothing is happening, the major news groups spend their days talking about what the next one could be and when it might happen.
It’s 100% speculation that isn’t of practical value to anyone, but when we hear it every day, we become scared of it and begin to over-prepare. People start building bunkers in their back yards and stockpiling guns. They spend lots and lots of time lowering their vulnerability as low as possible while the threat is practically non-existent.
If that provides enjoyment of some kind, by all means, stockpile away! But remember that the statistical threat of terrorism is microscopic, so the efforts are likely wasted.
It would be similar to protecting your house from a tsunami when you live in the mountains, or from a landslide when you live on the plains.
For Best Results, Counterbalance Your Threat
If Risk = Threat x Vulnerability, then the only variable you can take action on is vulnerability. Threat is beyond your control, and risk is a function of the other two.
As you go through your life and assess the risks you face, use this simple equation to decide how to prepare for them intelligently by matching the amount of work you do to prepare for a threat with the actual prevalence of the threat.
It’s like trying to apply Newton’s Law to keep an object at rest. You don’t want the “ball of threat” rolling toward you, so you apply enough pressure against it to keep it in place. But you also don’t want to spend a lot of time trying to push it to the other end of the universe because that takes your attention away from all the other balls that are rolling around.
Your life and everything you’ve built is too precious to leave it susceptible to a threat you could easily prepare for, but life is also too short to spend all your time preparing for threats that won’t materialize.
Risk = Threat x Vulnerability. Prepare wisely!
Yours in risk-taking,