Sunday, November 23, 2008

Head veto heart.

Despite my seeming negativity, the biggest danger for me is my native optimism. I always think I'll weather the storm better than anyone else, and that kind of arrogance can get me in trouble.

The analogy I've come up with for the risk/reward ratio is: Dancing on the Edge of the Cliff.

Retail is like dancing on the edge of a cliff. The closer to the cliff you are, the more vigorously you dance, the more reward you reap. Of course, the herky-jerky motion is likely to carry you over, if you're too close. Or the vigorous motion might just weaken the edge of the cliff.

I kind of like it. The danger and stress, the skill it takes. But I've also gone over the edge a few times, caught myself a scraggly bush and crawled back up.

Chastened, I moved further away from the cliff.

Away from the cliff, you dance much slower and reap much less reward, but the danger is much less.

I've always liked this analogy (metaphor?) because it also includes competition in the scenario. If you dance too slowly, and too far from the cliff, you risk a competitor coming between you and cutting off all access to reward.

So you have to determine whether that person is just going to go flying over the edge, or get smart and retreat, or be so damn good at it that he'll dance and dance and survive.

Of course, I think no one survives on the very edge forever.

Anyone who survives finds that small median between what's ultra dangerous and ultra complacent.

Of course, there is always a chance that the entire hillside will fall away, taking everyone with it.

When those times occur, and I think we're in one now, I use a different analogy.

Think of an ocean as your risk/reward median. The closer you are to the life giving waters, the more reward you reap. The further away, the drier and deader it is.

Of course, if you are too close to the edge, the tides and the waves will eventually wash you away.

But too safe, and you're on dry sand with old cracked crab shells and not much reward.

Even then, a giant wave could come and grab you.

Some people are sitting complacently on giant logs, thinking nothing can reach them. But a big wave may be headed toward them, that will loosen the log and crush them beneath.

Other people have built really large and formidable sand castles close the edge, and you watch them, knowing that the waves are undercutting their walls.

Anyway, I've retreated up the beach, and will just wait for the storm surge to die down and hope a giant massive wave doesn't come and get me.

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