Emotions, Risk and Business
Lets talk about emotions, risk and business.
They mix like oil and water.
Emotions like greed, fear, anger and sadness cloud our decision making and form a trap when it comes to business and decision making.
We’re making decisions all day, every day.
How much do I pay this employee? How much do I invest here? How much bank debt should I utilize on this acquisition? How risky is this deal and how likely is it to happen?
Emotions can lead us to INCORRECTLY weight factors when making these key decisions.
Greed will lead is to take more risk than we realize and potentially lose it all.
Fear will lead to us selling out at the bottom of the market.
Anger will lead us to say something we can’t take back and damage a relationship with a key employee.
All of these mistakes can be incredibly expensive mistakes. The most important being our inability to properly assess risk.
Risk involves identifying and assessing FOUR key things:
- The event that might set us back
- The likelihood of that event happening
- The potential damage that it would cause if it happens
- How much control I have over that event happening
Incredibly difficult to do because we don’t know what we don’t know and we also know a lot of things that we don’t know.
Greed, fear, anger, ego and any number of other emotions can CLOUD our ability to properly assess these risk factors and lead us to making poor decisions.
This stuff is incredibly difficult. Everyone gets it wrong. Nobody can predict the future. Nobody can control all external factors. Business is nuanced.
So what can you do to help?
The best solution:
Surround yourself with smart people who aren’t YES MEN.
It is tempting (especially as you gain more success) to surround yourself with people who agree with you on everything.
Don’t do this.
I encourage the leaders of all of my companies to stand up and call me out if they see a potential issue. If they see a blindspot. Or if they flat out disagree with the direction we are heading.
The CFO at my self storage company pulled this card on me in 2022. He went on vacation and left me to underwrite a few deals we had in the pipeline.
I really liked one deal and made an aggressive offer ($5 million).
He got back and stood up to me and made us back out of the contract. And it was the best decision we could have made (it was overvalued for a few reasons I didn’t properly identify). It saved us a lot of headache and money in the future because he had a different (and correct) view of the 4 things that impact risk discussed above.
It was a learning experience for me.
Surround yourself with smart people who aren’t afraid to challenge you and watch your world open up.
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“Few things are worse than running in the wrong direction enthusiastically.” – Keith Cunningham
How do you know if you are truly working on the right things?
I answer in this short podcast episode.
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This is one of the best (and most educational) tweets I read this week:
Onward and upward,
Nick Huber
P.S.
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I’m proud of the team at Bold SEO and it’s been awesome to see what we’re doing for small businesses.
Selfishly, it’s also been great to see what they are doing for my own businesses.
Below is a screenshot of a text that Barrett (my partner at Bold) got from one of Bold’s clients.
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