• Revenue Cycle Management
  • COVID-19
  • Reimbursement
  • Diabetes Awareness Month
  • Risk Management
  • Patient Retention
  • Staffing
  • Medical Economics® 100th Anniversary
  • Coding and documentation
  • Business of Endocrinology
  • Telehealth
  • Physicians Financial News
  • Cybersecurity
  • Cardiovascular Clinical Consult
  • Locum Tenens, brought to you by LocumLife®
  • Weight Management
  • Business of Women's Health
  • Practice Efficiency
  • Finance and Wealth
  • EHRs
  • Remote Patient Monitoring
  • Sponsored Webinars
  • Medical Technology
  • Billing and collections
  • Acute Pain Management
  • Exclusive Content
  • Value-based Care
  • Business of Pediatrics
  • Concierge Medicine 2.0 by Castle Connolly Private Health Partners
  • Practice Growth
  • Concierge Medicine
  • Business of Cardiology
  • Implementing the Topcon Ocular Telehealth Platform
  • Malpractice
  • Influenza
  • Sexual Health
  • Chronic Conditions
  • Technology
  • Legal and Policy
  • Money
  • Opinion
  • Vaccines
  • Practice Management
  • Patient Relations
  • Careers

Risk and Luck

Article

Every decision we make is, at some level, based on an informed risk-reward ratio using the best information available for our patients. Yet, why when we see the word "risk" used in financial circles are we at a loss.? Why do we not understand what risk means in a financial context?

Every doctor knows all about risk and knows it intimately on a daily basis. Every decision we make is, at some level, based on an informed risk-reward ratio using the best information available for our patients. Yet we see the word "risk" used in financial circles and we are at a loss. We draw a blank because we don't know what risk means in a financial context.

In its broadest sense, risk can be defined as that of which we are afraid, particularly the unknown. In the investment world, risk is often measured by volatility. This is the amount of variance in return over any time period. It doesn't help much that market quant rats tell us that in a normal period most investments will fall within one standard deviation of its average about 2/3 of the time, and two standard deviations about 95% of the time. But what's a "normal period?"

But before we all fall asleep, consider the idea of the probable and possible maximum loss. Just like some patients will ask, "What's the worst case scenario, doc?" Just as we refer to epidemiologic studies for our estimates, financial types refer to probability studies called Monte Carlo simulations, which show how variance decreases over time. You could Google it to see examples of what I mean (they're actually kind of interesting). That's one reason why there is a different investment strategy for young docs getting started and older docs looking to conserve capital.

Bear in mind that uncertainty differs from risk. Uncertainty says that you know there are 52 cards in the deck, but you don't know which one will come up next. Risk says you don't even know how many cards there are, let alone what might turn up.

Another way to look at financial risk is that there are different types: longevity (no one can predict how long we will live), managerial risk (meaning you and/or your advisor are wrong), and general market risk (which we have all painfully experienced recently). Inside the broad financial marketplace, there exists company risk, sector risk, country risk, currency risk, commodity risk, and on and on. The reason we diversify is to minimize a potential unpredictable hit from any one of these categories. But, like life itself, there is no true safe harbor. We diversify, do our best, and muddle through.

Thomas Oakeshot, the 18th century English philosopher, said that we are all on a ship having left no port and sailing to no port. We're just trying to maintain a stable keel, holding off entropy, if you will. Not being entirely aware, or in control, of all the forces in play, luck plays a role, sometimes a large one as we all have learned one way or another in our lives.

Occasionally, an unpredicted, and unpredictable event occurs which can change everything; an asteroid wipes out the dinosaurs, for example. There was a recent book by an economist who called this kind of occurrence a "Black Swan," after the unexpected discovery of its namesake when explorers first landed in Australia.

On a smaller, personal level, we all perceive certain events as luck, either good or bad, or it's cousin, coincidence. And we may know someone who is seen as "lucky," or "unlucky," and observe the ripples that spread from them. Is there actually something objective about this perception?

You might have guessed that studies have been done on people who identify themselves as lucky or unlucky. Happily, it turns out that there are things we can actually do to nudge ourselves across the spectrum of our lives from random chance to more control, which leads to more good results, or good "luck."

First of all, never underestimate the power of positive thinking. These studies showed that people who had higher confidence were "luckier" because they:

  1. Varied their routine and tried new things;
  2. Were more adventuresome towards people as well and built a "luck network" of contacts;
  3. Were more relaxed and could be more observant of opportunities to be seized when perceived, which was more often;
  4. Tended to act on hunches after all available information was taken in;
  5. Persevered through "bad" luck episodes.

Those who stop trying after a bad event are not likely to have a subsequent good event develop. They get "stuck" with their "bad luck." As long as it's not the lottery, where you have no practical chance at all, in general, the more you try, the greater the chance that good things will happen. When I asked a photographer how he got so many "lucky" shots at events, he replied it was because he just took far more pictures, than the average person.

Aside from enriching the quality of our lives in general, we can learn something from these studies about luck to improve our financial situations. Specifically, talk to more experts and be will willing to try new, prudent approaches. Not a shotgun, "try anything at any cost" approach, but keep trying in a thoughtful way. Didn't I once reference Winston Churchill's mid-war valedictory at Harrow School? The myth goes that after all the introductory hubbub had subsided and the murmuring had started, following a long display of shooting his cuffs, puffing his cigar and adjusting his standard white-polka-dot-on-navy bow tie, he simply leaned into the microphone and proclaimed, "Never, never, never give up!"

In truth, he said much more, though nothing so good as this:

"Never give in. Never give in. Never, never, never, never--in nothing, great or small, large or petty--never give in, except to convictions of honor and good sense. Never yield to force. Never yield to the apparently overwhelming might of the enemy."

Now that's what I call a luck maker...

Related Videos
Victor J. Dzau, MD, gives expert advice
Victor J. Dzau, MD, gives expert advice