How big a risk must you take?

red_20onionI struggle with making choices especially when an opportunity comes along disguised as risk. I’ve learnt from experience that discussing these with friends helps me take better decisions. I’ve also learnt that these discussions can throw up interesting content for my blog (like this one).

As of last month, I had never come across the ‘Onion theory of risk’. I don’t know if you’ve heard of it but I absolutely loved the way my friend put it across.

He said – ‘Every risk you take is like peeling a layer of an onion to get closer to the ‘truth’. You do not want to crush the entire onion to get there’.

At first, I laughed at the visualization. Then, it sunk in. There are two cardinal rules that separate risk from foolishness:

  1. Don’t take a risk that is too big for you to successfully get through and
  2. Don’t take risks that will destroy your onion i.e. everything else in your life that you’ve carefully built.

Take uncomfortable opportunities. Take opportunities that will ultimately lead you to where you want to get to. Don’t take them just because you think you should be taking risks.

I’ll leave you with one last bit from the PMARCA guide to startups

“If you’re an investor, you look at the risk around an investment as if it’s an onion. Just like you peel an onion and remove each layer in turn, risk in a startup investment comes in layers that get peeled away — reduced — one by one.”

So what does the onion theory mean to you?


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