FBC – 65 – The Risk vs Reward Rule

The Risk vs Reward Rule.

There is a simple rule you need to understand about risks and rewards. If you are looking for a solution to earn more and scale your business while working less, then you are in the right place.

I’m still here on the island and I want to tell you about something.

And so the agent. The dude is amazing. He does so much for this community here. He's built wells and put electricity and buys food and animals, like horses and pigs and buffaloes and stuff for the locals just to allow them to earn their living and stuff. And he knows everybody on this island. And the dude is a genuinely nice guy. I had the chance to talk to him today we had more time to spend together. He has a big heart and he has a mentality as well.

And I told the man this is what I respect about people. You know I respect the hustle. Regardless what you're doing, what kind of job you're doing. I respect people's time now. I respect people's efforts, whether what you're doing is successful or is not successful. And then you define successful right that the success is defined by each and every person.

So anyway the subject of the podcast today is the relationship between risk and reward. There is a relationship between those.  I was talking to the agent here. You know. We were talking about the land and stuff that he has. My opinion about this is that when you're buying land, the big part of what you're buying is risk. OK.

The Risk vs Reward Rule

So I will explain. So right now I want to buy something from him. I am buying risk. So the existence or the absence of risk.

So when he came here nobody was here. So nobody was here and there were no real estate agents. There were zero guarantees that if you buy land you'll be able to sell it. OK. You need to understand this. So when he got here the risk was high. It was the highest risk possible. So basically whatever money you put in there you have practically zero guarantee that you were going to make it back.

So when the risk is that high then the rewards need to be quite high as well. So what was his reward? It was that he was able to get the land pretty cheap. All right. So you and me we had the opportunity to go and buy the land but we didn't. But he did!

His reward for the high risk was the low price and your reward for the low risk is the high price. Right. So don't be like all mad about it like how he paid ten times cheaper than me and stuff. Well yeah you could have done that. You could have gone there and bought the land at the same time but you didn't.

You were just waiting for people to fail or succeed and then you get in. So I told him dude I don't have a problem. I don't really care how much you bought the land for, because I know the relationship between risk and the rewards.

So how does it apply to you? So you're faced with this situation right now when you're trying to start your own business. In your current profession, I don't know what you do. If you’re an employee or if someone is paying you, the reward that you'll get is capped. So you’re limited to whatever your boss is going to give you or whatever raise you're going to have. Why?

Because you're in a situation where your risk is low. So your rewards are going to be lower. That means that your reward in terms of money that you can make is lower. So this is the situation you might be in right now because you still have your job and this is a situation where people are criticizing and moaning about how this is unfair. Why does the boss get more money than I do?  But you need to understand something.

The dude has way more risk than you have right. So when that person invests all their money all their time and put the like a mortgage on their house and stuff like that to be able to start the business and the business wasn't making any money but they still had to pay you and they still had to pay like the office and everything, the risk was huge!! So that's why they're getting more money than you.

I don't want to scare you because this this is again we've established that this was the industrial age. This is what you had to do like renting offices and all that stuff. But today you don't have to do that. Today's the digital age. So you can start your business and have unlimited rewards without having the super high risk as it was in the industrial age. OK.

So anyway let's go back to my point. My point was that people who are an employee have limited risk and hence the rewards are going to be limited. Your salary and stuff is going to be capped. Now if you're starting your own activity today and again you can start your own activity doing a podcast for example. So you download anchor and you do your podcast or you create a Facebook group or you do something you know it doesn't have to be something crazy right. And there is a risk. So the risk is higher than the average Joe. All right.

So it doesn't mean that the risk is super high like back in the days when you had to go to the banker and borrow money and mortgage it put a like a mortgage or something on your house and all that stuff. Yes. That was high. Today you're able to do the same thing as these people did. But still in comparison to the average Joe, it's a way bigger risk if you understand what I mean.

The Risk vs Reward Rule

So your risk is super high compared to that person. But it means that as your risk is high; your rewards are going to be higher as well. So your rewards in terms of salary are unlimited. Right. It's unlimited how much money you can make or how much reward or whatever. The reward is for you!

If you have your own business there's nobody saying Well do you can't make more than “X”. No! You're the boss. You can make more. If you find a way to make more, you will make more. So this is what you need to understand is there is a correlation between risk and reward the lower the risk, the lower the reward. So you know if you stay in these like the comfort zone where you're not taking any chances and you're just moaning about your job, it's not going to change much. You know the rewards are not going to be very high my friend. Right.

But if you do something about it and you start your own activity it can be a side activity in the beginning as well because people assume that you have to stop everything you're doing and just start the entrepreneurship game and stuff. No you can have something that runs on the side.

And once it becomes a pretty good income and you get some traction then you can make it your activity. But when you do this your rewards are unlimited because your risk is higher. So hopefully that makes sense.

So if you have dreams and you think that your job or your current situation is not going to get you there, then it's a good reason and a good time to start thinking about starting your own thing. Just by understanding this concept of risk versus reward.