The Value of Risk: Why Alternative Paths Matter in Investing
Imagine this: you meet with a Russian oligarch in a secluded forest. He opens a suitcase stuffed with $10 million and presents you with a choice. The offer? Play Russian roulette. One pull of the trigger, with five empty chambers and one loaded. If you survive, the money is yours—life-changing wealth that would free you from ever having to work again.
You take the chance. You pull the trigger. Click. The chamber is empty. You're alive, and now you're $10 million richer. You go on to live in luxury, enjoying the fruits of a single risk that paid off.
Meanwhile, your neighbor, a prominent lawyer, works 12-hour days, 300 days a year, charging $500 per hour. After twenty years, he manages to save the same $10 million you earned in seconds. While you laugh internally at his effort from the comfort of your villa, what you don’t see—and what many fail to recognize—are the alternative paths. For you, five other outcomes existed, one of which could have ended in death. For the lawyer, the alternative paths were much narrower, ranging from slightly higher or lower earnings, but never a life-ending risk.
The Hidden Risk of Alternative Paths
This scenario underscores a key lesson for investors and risk-takers alike: alternative paths matter. While both you and your neighbor end up with $10 million, the risk you faced in getting there is vastly different. One path involved a life-or-death decision, the other a steady but predictable accumulation of wealth.
Investors often overlook these invisible paths, focusing only on the outcome—the $10 million—while ignoring the risks that led to it. Many who speculate on high-risk investments like junk bonds or options may see short-term success but fail to account for the numerous alternative paths that could have led to financial ruin. In reality, $10 million gained through risky ventures is worth less, to the rational mind, than the same sum earned through steady work over time.
Risk Is Invisible—But It Shouldn't Be Ignored
Risk is rarely visible. The alternative paths are hidden, and our brains are wired to obscure them. We tend to rationalize our success, ignoring the risks that we flirted with along the way. But considering these invisible paths is crucial to understanding the true value of success.
As my American friend once pointed out after losing a coin toss for dinner, "Considering the alternative paths, you've actually already paid for half of this dinner." This simple observation reveals a powerful truth: every decision, especially risky ones, carries unseen outcomes.
Conclusion: Value the Steady Path
When evaluating success, it’s not just the outcome that matters—it’s the risk involved in getting there. Those who achieve wealth through calculated, low-risk methods should be admired, not only for their financial success but for the stability of their path. Risky dealings may seem exciting and rewarding, but they carry unseen dangers that make their outcomes far less secure.
In the end, success earned through years of labor, whether as a lawyer, consultant, or entrepreneur, is often more valuable than success gained through risky shortcuts. Recognizing the alternative paths—and the risks that come with them—is essential for understanding the true nature of success.
