Bad risk:
Due to the mild weather on the coast, the sort of outdoor hockey weather we've come to expect in Prince George was a rare thing for us growing up in North Vancouver. As hockey-crazed youth, we sought snow and ice in the nearby Grouse and Seymour Mountains.
This was no casual craving. One day few of us skipped school and piled our hockey gear in to an old car and drove up in to the hills to a reservoir, which had frozen over. My older brother knew a trail, which lead through the forest, over a canyon and on to the lakeshore. Rather than a proper bridge over the canyon, a water supply pipe of about 18 inches in diameter straddled the gap. A chain link fence on either side of the canyon was designed to protect the pipe from people like us. Or perhaps to protect people like us from the pipe.
Peering down over the canyon wall provided a sight I will never forget. Icicles clung to jagged rocks along the 50-foot walls below. An ice river at the bottom promised to keep the body chilled while the men figured out a way to retrieve the corpse for loved ones. Even the pipe itself was slick with frost and ice, a result of the freezing mists emanating the chasm.
Shouldering our hockey bags, our task was to climb the fence, gingerly place our gear down on to the pipe in front of us, and laterally shinny the pipe, pushing the bag along in front of us a few inches at a time until we got to the fence on the other side.
School was looking particularly desirable at this moment in my short life. When my turn came to cross, I reached the downward side of the fence, and stood there clinging to its reassuring stability, frozen -- in so many ways -- and wept. Urged on by the others, (mostly my older brother who commanded: "Don't be such a baby!") I eventually pushed my bag a bit forward, crouched down and hugged the pipe with full arms and legs like a frightened baby monkey on its mother's hip. Waling, wetting the pipe with my tears, and maybe a small amount of pee, I inched across very slowly to the safety of the other fence. At that point, the powerful fist of my older brother gripped my bag and threw it to safety, then scrunched the back of my coat and lifted me over the fence in one fell swoop.
Managing risk:
In retrospect, it's kind of funny that early in my financial career I leaned toward risk management as a profession, and eventually made it my specialty. I took this very seriously. As we have seen throughout the world, the barrier between profit and catastrophe in the world's banking system, is only as impervious as the risk managers who guard it.
But as one respected colleague said to me: "It's our job to manage the risk, not eliminate it." Good point. The money is made in sizing up good risks, and then biting the bullet.
The same is true in investing. The right amount of risk will vary for people of different ages and temperaments, but the truth remains that a well-designed, calculated risk needs considering, lest we regret opportunities missed.
You may choose to completely avoid the icy canyon, or you may build a proper bridge over it, then lean over the edge and enjoy the view.
