Consequence & Probability

What’s the riskiest thing you did this week?

Maybe you crossed the street when the sign read, “Do not walk.” Risky? Technically. But if you judged the moment, it probably wasn’t a big deal.

That’s the essence of risk. It’s not just what could go wrong, but how bad it would be and how likely. Risk is the intersection of consequence and probability.

Think about an old boiler keeping your building warm in winter. It hums along quietly. Seems fine. But if it fails, the impact is massive. Low probability, yes, but high consequence.

It’s helpful to think of risk on an XY axis. You generally want to operate in life in the low-probability, low-consequence quadrant. Unless you’re doing it intentionally, you want to avoid high-probability, high-consequence. But the real problem is in mistaking one quadrant for another.

Because we confuse consequence with likelihood. And that confusion can be expensive.

Like when a handful of critics triggers a disproportionate response. You assume catastrophe. So you spend time, energy, and credibility neutralizing a threat that truly might have dramatic consequences… but with a miniscule chance of materializing.

This is fear overwhelming inquiry and analysis. Thus the key point is missed. Could those critics even pull off what would indeed be a worst-case scenario? If the probability is tiny, then no, and you’ve just spent valuable leadership capital on a paper tiger.

Calculate risk. Don’t assume it.

Get into the habit of evaluating risk. It’ll save you time, money, energy, and anxiety.

👇 Less than a minute on how to think clearly about risk, so you can lead better.