Risk Taking

I was recently reading a magazine article that was discussing the importance of CEOs in The Atlantic . It started by discussing how the price of Apple stock rose and fell based on the health of Steve Jobs. Interesting article and the point it makes is that some CEOs take companies on new paths and some simply manage the company they have.

It discusses what type of company might benefit from the various type of CEO, relatively new innovative companies probably need the innovative CEO while old established ones can get by with the caretaker type.

One aspect of having an active CEO is that they oftentimes can create as much harm as good. I think this is a profound insight. In our culture we often idolize the risk takers. An example would be the famous saying by Adm Farragut about "damn the torpedoes, full speed ahead". The reason this is a famous line is because he managed to avoid the torpedoes and capture Mobile during the Civil War. Now, possible the admiral knew that the torpedoes didn't really represent much of a threat, I am no expert, but I've often wondered if history would even know his name if his ships had been sunk by those very torpedoes.

Successful risk takers represent a certain percentage of those who actually take risks. Often this group has spectacular success and is held up as an example of successful behavior. It should of course be noted that this is 20-20 hindsight. Those who take risk and fail are effectively invisible to us, unless the failure was so catastrophic as to be memorable. The inverse to Adm Farragut was probably the Captain of the Titanic who pretty much said damn the icebergs, full speed ahead. We all know how that turned out.

If you consider successful poker players, the single most important characteristic is the ability to know the odds. If you never fold a hand, unless you are extremely lucky, you are going to go broke rather quickly. It is the player who as the song points out "knows when to hold them and knows when to fold them" who will most likely do well.