A lot of people think that
that risk and reward are related.
But this isn’t always true.
Let me explain…
There’s a maxim out there which says that small risks lead to small rewards…
And big rewards only come from taking big risks.
However…
Big rewards can also come from taking very small risks.
Opportunities like this are known as asymmetric.
They have limited downside but unlimited upside.
In other words, your downside is capped but your upside is uncapped.
These are the types of bets I like to take…
Because the maths is stacked in your favour.
Let me give you three examples from my life.
The first is writing my book.
There’s not much downside here.
Sure, it took time to write…
And I spent some cash on the cover design, editing and recording the audio book…
But this was capped.
And the upside is uncapped.
First, the book is packed with value…
It’s helping people get more clarity in their lives.
It could also open the door to other opportunities…
Like consulting. Speaking gigs. Or podcast appearances…
All of which let me meet more people, build my network and get my message out.
It gets better though…
The book is evergreen.
Now it’s written, it can never be unwritten.
And over a period of time the opportunities could increase further…
A bit like compound interest.
And this could be worth its weight in gold.
The second asymmetric bet was quitting my job.
I realised the risks of quitting were actually pretty low…
And they were capped.
If things didn’t work out, I could get another job somewhere.
It might not be the best paying job…
And it might involve some hassle and frustration…
But this would only be temporary. And this was the absolute worst case scenario.
Meanwhile the upside is uncapped...
Growing my coaching business means helping more and more people make positive changes in their lives...
And could also mean financial freedom one day.
Even though the likelihood of financial freedom may be small, it doesn't really matter.
Because the chance is still there and the downside is capped.
That's what asymmetric bets are all about.
The third example is a little different…
It’s purely financial…
And it’s a bit more fun.
I enjoy having a flutter now and again…
And my favourite bets are on long shots.
I can bet a few quid…
And when the bet fails (which is most of the time) the financial impact is small.
But when the bet comes in, the rewards can be awesome.
Case in point…
A buddy of mine has been looking at the betting market for the next James Bond actor.
Unless you’ve been hiding under a rock, you’ll know just how feverish the speculation is.
Anyway, my friend mentioned he’d placed a few quid on Riz Ahmed…
And the odds were 100-1.
That got me thinking.
100-1 is certainly a long shot.
But I’ve seen a few of Riz’s films.
He’s a brilliant actor…
He’s the right age…
And the Bond producers like picking someone unexpected.
So I’ve put a few quid on too.
I think this is a great example of an asymmetric bet.
Last time I checked, the odds had dropped to 14-1…
So moving in the right direction.
These are just a few examples. Hopefully you get the point.
My suggestion is to be on the lookout for small bets that could lead to big rewards.
Because these are bets you want to be taking.
Alright, I need to wrap this up…
And head to the gym.
Have a good day.
- Tom
p.s. Do you have examples of asymmetric bets from your own life? I’d love to hear them. Hit Reply to let me know
