The Three Sides of Risk

I loved this post by Morgan Housel titled The Three Sides of Risk.

It’s a crazy story turned into a great lesson of risk and tied back into investing. I won’t ruin the article as it’s a fascinating piece that everyone should read so I’ll just end it with a summary quote.

But it opened my eyes to the idea that there are three distinct sides of risk:

The odds you will get hit.

The average consequences of getting hit.

The tail-end consequences of getting hit.

The first two are easy to grasp. It’s the third that’s hardest to learn, and can often only be learned through experience.

No matter what you do for a living or where you are in life, the three sides of risk applies to everything you do.