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Episode 479 – the Risk – reward equation

• Welcome back friends
• I recently have been thinking more about the concept of risk versus reward
• When facing decisions in my daily life, I have noticed that my tendency often is to go for the lowest risk and the highest reward
  • At least as I judge it prior to the action
• Low risk is usually something I know and have done multiple times
  • I take the same way to work, even if there is traffic because the one time I veered off to take the side streets I couldn’t get back on the freeway because of all the traffic
• So – in my mind – the lowest risk action is also the highest reward
• But then I reflect on my outdoors adventures like climbing or hiking
• Prior to my trips, I hardly ever know what awaits me because its always a new area or route or path that we take
  • I pack my stuff not knowing if I have everything I will need
  • I make plans not knowing if they will actually come to fruition due to so many unknowns
  • I start the day not knowing what awaits me, and how it will end
  • I simply go for it, hoping for the best
• And at the end of such a day or trip, I feel amazing
• The reward is the accomplishment of an unknown mission
• it is an indescribable feeling
  • not comparable to much else in my life

• We all assess risk and reward on a daily basis, whether we notice it or not
• the amygdala is the part of the brain that does the job for us
  • it sits right above the brainstem, in what’s called the medial temporal lobe.
• The amygdala processes our base emotions that come from sensory inputs, like anger, avoidance, defensiveness and fear.
• When we see, hear or feel something that’s a potential danger, the amygdala reacts immediately.
• It pumps adrenaline and other hormones into your bloodstream, triggering the fight-or-flight response, causing increased heart rate, increased muscle tension and sweaty palms
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• When was the last time you had sweaty palms?
• Climbers carry chalk with them to keep sweaty hands under control because those slip on rock
• I also carry chalk but I rarely use it – only when I am very scared of the route ahead of me or when I am leading
• We all have different bodily reactions to risky situations
• My heart usually responds first by beating pretty fast – when my hands get wet, I know that I am now really scared because it occurs rarely
• But I also know that I am the one that is scaring myself
• The more I think about how scary the route will be, the more scared I become

• Some scary things are not really as risky as they seem, but we make them scary
  • I noticed this after the climbs I dreaded
  • I realize every time after I venture outside of my comfort zone
• And as we move through the thing that scares us, and see that it wasn’t as bad as we thought, we increase our tolerance for risk
  • After over a year of mountain climbing, including hiking up and down scary terrain, nature doesn’t scare me as much anymore as it used to
  • In fact, I just said yes to a backpacking trip I was invited to – something that seemed scary and highly uncomfortable to me only a few months ago

• and this is where the equation of risk versus reward has begun to formulate in my mind
• somehow, we assume the reward is greater with a lower risk because we know the outcome
• yet, I have found, that the rewards are actually greater and better, when the risk is higher
  • while we cannot predict the outcome when we take a risk, we also cannot predict the reward
  • and I realized, that the unknown reward is a much better one than the predictable one
    • because it surprises us
    • because its something we may have never considered
    • because it came as a result of taking a chance
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  • You see, I think most of us make decisions based on the lowest risk and the highest reward
  • But we don’t look at the correct reward because the reward awaiting us after the risk is taken is often a surprise
  •  
  • Lets take relationships
  • I can speak from experience here
    • So you say YES for the millionth time to the guy or gal that hurt you every time you said yes before
    • Why?
    • Because its less risky in the moment to say yes – you know what to expect, even if its not positive
    • Change is always risky because we don’t know what will come
    • Saying no for the first time is hard
    • But the more we practice it, the better we get
  • Its hard to say no when we don’t know what will come next
  • But every time we say yes to a short-term reward,
    • Like a few moments of fun and pleasure
  • We forego the unknown long-term benefit like peace and the possibility for a new and better relationship

• Here is Another example – this one from John Mayer

He talked about his decision to go sober in 2017 on Twitter:

“If you look at drinking the way you would look at anything else, which is risk versus reward—what am I giving up, what am I getting—drinking has some of the worst odds that ever existed. Six days into my last hangover, I had a conversation with myself. I looked out the window and I went, ‘OK, John, what percentage of your potential would you like to have? Because if you say you’d like 60%, and you’d like to spend the other 40% having fun, that’s fine. There’s no wrong answer, so what is it?’ I went, ‘100.’”

• I imagine giving up drinking is not easy
• There is probably no short-term reward at all for people that are addicted, but I am sure you can see that the long term one is huge
  • It lasts longer than a few hours of buzz
  • It equals to a healthier and happier life
• But in the moment of decision-making – the long term reward doesn’t appear to be there at all
• We only see what we know
• Everything else is unknown, and potentially painful
• And our brain is conditioned to stay away from pain because thousands of years ago, we actually faced life-threatening pain
• Today’s pain is not the same anymore
  • Saying no to cake doesn’t compare to running from a tiger
• Yet to us it still feels the same
• Except, when I look at my sweaty hands example, I know that there are degrees of pain,
• And when my life really appears to be in danger, I know it
• It feels different than an empty stomach that’s trying to resist food because I decided to fast
• Here is the thing:
• Before we go for the quick and familiar reward,
• We need to spend more time thinking about the potential reward
• Ask yourself the same question that John Mayer asked:
• What percentage of potential would you like to have?
• The next time the guy, or the wine bottle, or the ice cream calls your name, write out your risk – reward equation
• Weigh your rewards, then compare your risks
• Here is a way to look at the reward equation:
• Reward equals :
  • Short term benefits of feeling good – long-term benefits of feeling bad MINUS
  • lets say you feel bad for a day after eating that cake or seeing that guy
  • and you feel good for one hour after the guy or the cake
  • 1 hour – 24 hours = – 23 hours
  • The Reward is negative overall because the energy spent on hoping, waiting, wondering, maybe fighting outweighs the few moments you actually enjoyed
  • 23 hours of energy wasted
  • Only 1 hour of pleasure gained
• On the other hand, the risk equation looks like this
• Risk equals :
  • Short term risk of feeling bad – long-term risk of getting a much better outcome than the current one
  • lets say you say no to the guy and feel bad for an hour
    • Regretting your decision
    • Crying because you miss him
  • But then you go out with your friends for dinner instead and meet someone new and better, that turns into a relationship that lasts for years
  • Again, we get a huge negative number
  • but this time it’s the risk that is completely minimized by enduring a few moments of pain
  • the risk we thought is so huge is actually negative, meaning it is overshadowed by the rewards that follow it
• this is how weighing risks and rewards makes sense to me
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• If it helps you, write out you risks and your rewards
• For short-term rewards there are usually not that many rewards other than a few moments that pass and are quickly forgotten
• But the potential rewards that await you after taking a small risk are endless
• Let your imagination play
• Before my divorce, I had no idea of the life that I am living now
• Climbing, speaking, podcasting and all the wonderful people I have met
• My wildest imagination couldn’t have cooked up all this
• And yet, as I was going thru my divorce, there were days that were so dark, I could barely see the sun outside,
• I imagined my life to be doomed for the remainder of my days
  • No love, no friends, no future
• Risk versus reward
• With risk, there is potential – your potential
• Now its just a question of
• What percentage of potential would you like to have?
• Have that that candid conversation with yourself
• And decide how much of our potential you would like to have,
• That will determine which equation you will go with
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• Much love my friends