Risk Intelligence

2 min read Risk Intelligence

A friend wrote this book I read about ten years ago. I understood that I didn't understand risk. I was a "word thinker"--someone who would rely on internal argumentation vs a visceral understanding of risk, especially tail risk. I vowed to be able to understand risk.

And I paid tuition. The best way to understand risk is to put yourself at risk. Unfortunately, you can't do that physically too many times before you run out of health points in real life. The markets are a much better teacher.

Playing in the markets--I still invest my own money, and I love it--helps me weigh and evaluate risks, and as a side benefit understand what the knobs of leverage are in a business, and as a second side benefit, make returns.

Weirdly, risk intelligence plays a massive role in technological decisions. Using the fancy new tech vs Lindy tech. Planning rollouts. Hiring. Choosing vendors. Even debugging. In technology, the smallest decisions can have the biggest ripples.

For vendors, for example, I ask myself: what are the buckets of risk this particular vendor is exposed to? Who are the alternatives and are their risk profiles different? What's the easiest way to hedge it out?

Is there a way to get this without losing a bunch of money in the markets? Yes--online poker. It's play money, but you take it seriously.

And there's one more book I'd recommend about this:

As for my friend who wrote the book? One of the most interesting guys I've ever met. Was one of the first victims of cancellation before we had a term for it. Ended up doing something else I'm interested in, experimenting with utopias. Wound up in a psychiatric hospital. Moved to Guatamala. No idea what he's doing now. But what a life.