Patricia McGuire
University president

Patricia McGuire

President of Trinity Washington University.


Smart risks, dumb risks

Q: NBC's bold decision to move Jay Leno into prime time has been a ratings disaster. How often does a roll of the dice hurt instead of help? Are gamblers more likely to succeed than those who are cautious by nature?

Two words, NBC: New Coke.

Moving Jay Leno into prime time was like changing Classic Coke's formula -- a disaster. Coca-Cola paid dearly for misreading millions of Coke lovers who rejected the new brand.

Some of them had the same reaction to NBC's unwise gamble to move Leno into an earlier time slot, while elevating the less-talented Conan O'Brien to the pinnacle of late-night stardom. They never got over it.

At the same time, on the rival network, Letterman suddenly became a hot property by admitting to chasing hotties at the office, a confession prompted by an extortion plot that only added sizzle to his ratings. Timing is everything in showbiz; NBC's gamble became even more disastrous as Letterman's weirdness quotient multiplied.

While knowing how to take well-considered risks is an essential trait for personal and professional success, gambling is different. Gamblers roll dice, while risk takers measure the odds based on legitimate data.

A risk-taker may deliberately chart a course against the wind with a specific goal in mind, but a gambler simply throws caution to the winds and hopes for the best. Hope is not a strategy.

While corporate gambles like New Coke or Leno at 10 p.m. may not seem overly serious. Sure, there were some disgruntled customers and some loss of market share for a while, but ultimately it's all recoverable.

But the gambling culture in some parts of corporate life led to the financial catastrophes that destroyed institutions and drove the great recession of the last two years.

The financiers who developed new, complicated, largely unexamined investment instruments like sub-prime mortgages and collateralized debt obligations and credit default swaps were gambling with other people's money. In some cases, the instruments were so arcane that nobody really understood them at all.

Remember, prudent risk takers study data and trends, but gamblers throw caution to the wind and hope for the best.

Warren Buffet famously said that you should never invest in something you don't understand. Still, he confessed to ignoring his own good advice, losing great sums of money when he abandoned prudent risk-taking for outright gambling.

The late Robert H. Smith, the real estate developer who built Crystal City and much of downtown Washington, gave a great commencement speech in 2008 to the graduates of the Robert H. Smith School of Business at the University of Maryland College Park.

Smith talked about the importance of learning how to fail well in order to achieve great success. He affirmed the need to take good risks, to accept the risk of failure. Most important, he talked about how to learn from failure in order to craft future success.

"Failure gives you the opportunity to make a leap of learning," he said. "When you come to a place where you have exhausted every other option, that is when you say, 'There must be a better way to do this.' And in finding that better way, you will discover great success."

Smith was no gambler, but a prudent risk-taker. Some of his risks led to failure, as he readily admitted, but most of them produced great success, some of which he returned to the community in the form of astounding philanthropy. Learning to take good risks without resorting to gambling away the store is the best route to real success.

By Patricia McGuire  |  January 14, 2010; 12:02 AM ET  | Category:  taking chances Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   StumbleUpon   Technorati  
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