Children love risk. They take risks for fun. Ding dong ditching the meanest neighbor. Ghost in the Grave Yard set in the blackest pitch of night. Lakeside cliff jumping. Sledding, full speed, through the trees, down the neighborhood's steepest hill.
Natural-born risk takers, children. Possessing an innate sense of optimism, kids will inherently grasp at most anything that captures their fancy with little thought of downside.
Because their minds operate in the moment, children take great pleasure in the journey. The pursuit. The exertion of the exploration. There need be no other carrot. To children, risk is ample reward.
That changes with adulthood. Instead of gritting our teeth and going for the green, we choose to layup. Well, most do.
Some simply integrate risk into their lives as others may a law degree.
Austrian skydiver Felix Baumgartner broke the sound barrier by leaping from a helium balloon floating 24 miles above the earth. Trip Jennings became the first to kayak the notoriously turbulent lower Congo River. Jill Seaman spent decades bringing modern medicine to the world's most war torn areas. Barrington Irving became the youngest person (and first African American) to fly solo around the world. Gerlinde Kaltenbrunner became the first woman to summit all 14 of the world's 8,000-plus-meter peaks without supplemental oxygen. Jesse Livermore would leverage everything he owned in order to trade his way to a net worth of over $100 million in the early 1900s. Saddam Hussein defied the dire warnings of the western world and invaded Kuwait.
Racecar drivers. Surgeons. Despots. Entrepreneurs. Explorers. Post-50 mothers. Navy Seals. Sky divers. Maximum security prison guards. War correspondents. Circus performers. What do they have in common? Risk.
Their daily decisions are based upon the interplay between risk and reward. The rewards greatly differ. As do the levels of risk. Still, each regularly makes risk-calibrating decisions in pursuit of an end.
As children, we expose ourselves to risk for fun. The fun represents the reward. As adults, we take risks in the pursuit of goals.
With age comes a more measured, cautious approach. Our minds become burdened with responsibility. Our egos -- weighed down by the emotional trauma of a few defeats -- being opting for safer, more predictable outcomes. We begin considering our fallibility. Our inability to make up for life's setbacks.
Risk becomes less fun. More intimidating.
In his seminal book on risk, Against the Gods: the Remarkable Story of Risk, Peter Bernstein provides a comprehensive history of man's effort to undertake risk and probability. Gamblers in ancient Greece. 17th-century French mathematicians. Modern chaos theory. Drug testing. Bridge building. Wine making. And of course, investing.
Bernstein's point? Everything entails risk. The acceptance of that caveat enables one to better manage, and thus benefit by, life's inherent risks.
The art and science of investment management entails the near-perfect distillation of the risk-to-reward relationship. Because the accomplished investment manager's sole objective is to attain the best risk-adjusted return available.
In 2000, and so again in 2008, many investors and investment manager's lost sight of this responsibility. When things progress positively for extended periods, they often do. Lulled into a false sense of security, greater risk is taken in pursuit of greater returns. At such times, the markets usually teach investors and lazy investment advisors a harsh lesson.
The greatest risk? The students of such lessons learn nothing from them. And those that do not learn from history are doomed to repeat it.
Like wine and cheese, risk tolerance evolves with age.
At some point, we begin deferring on the risks required for achieving anything of historical significance. Opting instead for challenges that accompany that which is simply good enough.
My sons love to play the board game Risk. There may be no better means of teaching them the art and science of taking measured, calibrated risks.
One can achieve pure adulation by sending one's legions from Venezuela into Central America, and with a few lucky rolls, end up controlling all of North America. Conversely, tears flow when one's Napoleonic foray into Africa is soundly defeated on the planes of Congo.
Each turn, game and outcome holds lessons for their young minds. Cause and effect. Forethought. Strategy. Tactics. Deferral of immediate gratification in lieu of a greater goal. A ring-side look a the world-driving, history impacting relationship between risk and reward.
Whether your path is that of the arctic explorer or eighth grade teacher, risk acclimation is part and parcel of our lives.
Your morning meal. Your drive to work. Your relationships. Career choices. Professional licenses. Family planning. Geographic decisions. Schools. Social lives. Hobbies and habits. Friends and foes. Each entails countless interplays between risk and reward. From which your decisions will ultimately determine the direction and experience of your life.
So, why will some six-year olds try flips off the high dive, while others refuse to jump at all?
The neurotransmitter dopamine plays the primary role in one's risk-orientation. Fewer auto receptors in the facet of the brain associated with reward (and addiction) brings a freer flow of dopamine. Which makes any risky behavior more satisfying. Causing one to take bigger risks.
Dopamine enhances your propensity to explore, discover, and challenge one's self. It can lead to greater accomplishment, and greater loss.
It was dopamine that brought our ancestors to depart from the Rift Valley in East Africa 200,000 years ago, beginning a trans global quest for greener pastures. One that has never been satiated.
Dopamine catalyzed Louis and Clark's westward expedition. Put a man on the moon. Helped men ascend to The White House. Climb Everest. And enabled you to confidently approach your spouse for the very first time.
More dopamine leads to less risk aversion. Plain and simple. Devoid of this natural neurotransmitter, we would still be drafting sketches on cave walls somewhere in East Africa. Anxious about the world around us.
And so there is no greater, more complex and less understood a relationship than that which exists between risk and reward.
Speculators have made and squandered fortunes on a hunch. Would-be entrepreneurs have condemned themselves to poverty, risking everything on one unappreciated idea. Political, business and athletic careers have been shattered as one strove to attain the elusive philosopher's stone.
Mythology, history and literature are replete with this theme.
Gatsby risked everything trying to win Daisy's heart.
Icarus flew too high and fell to earth.
Napoleon, risking everything at the Battle of Waterloo, was soundly defeated and exiled.
Everything worth attaining comes with risk. Our loves. Careers. Faiths. Families. Friends. Every foray and adventure upon which we endeavor will be accompanied by risk and reward. Without one, there is no other.
Remember what our 26th president, Teddy Roosevelt, said of risk.
"Far better it is to dare mighty things, to win glorious triumphs, even though checkered by failure, than to take rank with those poor spirits who neither enjoy much nor suffer much, because they live in the gray twilight that knows neither victory nor defeat."
Risk too little, you run the risk of achieving nothing. Risk everything, however, and you risk having nothing. Therein that opaque and volatile equation lay the penultimate secret to satisfaction and achievement.
Wish I had the dopamine to figure it out.