The WAY to WOW Shows
The 24-Episode Campaign: Strategy 6
March 10, 2026
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[0:00] Who are you? And where are you going? What do you want? Hello and welcome to Business Lessons from the Military. I'm your host, Kevin Beml, and I'm here every Tuesday at 10:00 a.m. Pacific time to talk about military history, doctrine, and leadership practices. and then distill from those uh lessons that we can apply to our businesses and professional

[0:35] practices. So today I'm in the sixth episode of the 24 episode campaign. This is a series that I've developed that looks at strategy and doctrine across all the branches of the military. Um not going to get into a long explanation of that. I' I've talked about it um in in previous episodes and and I invite you to go to my YouTube channel or Spotify or Apple podcast. You can watch the last five episodes uh and and I I I talk

[1:10] about you know the background of this then but so today I want to jump right into uh what what I'm what is called uh strategy six. So the 24 episodes are broken down into uh four four parts basically and the first part is specifically on strategy. This is the sixth episode on that topic and I'm going to be dealing with the idea of calculated risk. So I think that uh you know people watch uh movies p

[1:45] predominantly uh I think or I should say predominantly it's watching movies that brings out this belief but they they see uh you know be it World War II movies or whatever where it looks like uh people in the military are you know taking risks they don't seem to particularly make any sense? I I know when when I was going through naval officer training, for some reason which I could never discern, they insisted uh one afternoon

[2:20] that we watch Saving Private Ryan. Uh now, um subsequently, I I did watch the movie. I mean, it's it's it's fine, but the idea that uh you know, a a the the army was going to order this uh small unit of soldiers uh to go and and pull one soldier out of combat and and in the event I think two or three of them were killed to save one, I mean, that is not the kind of risk that that the military would would

[2:57] actually take uh it it makes for a good movie and and and that was the point of it I suppose but but this is not how the military operates and indeed the military is I think more risk adverse than um than civilian life, civilian business life anyway, having been in both arenas for a considerable period of time and the reason I think is because whereas As risk in in the business world may mean, you know, loss of money. It

[3:34] could could mean, you know, degradation to reputation. In the military, risk often means people are killed or wounded. And despite again the way mil the military is sometimes presented in the media there is it it it is an extremely unusual commanding officer who who wants to put his people at risk. I know it was if if you recall the TV show uh MASH. So there was a there was a

[4:09] famous episode where the commanding officer of I believe it was a battalion was constantly sending his his men into situations where they were getting wounded and killed in high numbers. He kept doing it over and over and over again. And one of the surgeons, Hawkeye, played by Alan Alda, just got to the point where he couldn't take it anymore. And so he gave this this commander who was visiting the MASH unit something to drink that caused him to have a stomach

[4:44] ache and he performed a an appendecttomy an unneeded appendecttomy on him to get him pulled out of commanding that battalion. Right. And while, you know, to the best of my knowledge that isn't based on uh history, I'm I I wouldn't go so far as to say there's never been such a a commander of a military unit. However, it is by no means typical, quite the contrary, very unusual. Okay. Um, someone, you know, a military commander who's oftentimes uh cited for

[5:22] being reckless is General George Patton. I have studied General Patton's life and career for at least two decades now. That is absolutely untrue. So the reason that General Patton pursued war in the way he did was because he knew something and that was the more aggressively he attacked, the the more he kept pressure on the enemy, the fewer of his soldiers would be killed or wounded because the enemy would be kept off balance. the

[5:58] enemy enemy was would have to be constantly scrambling to try and mount any kind of coherent defense and he knew that that gave his army the advantage and in the event that that was certainly the case. So I think you we need to be careful in in our perceptions of of how the military approaches risk because it is the case that military commanders and strategic planners they are looking at calculated risk. It's not that they never take risk. Of course they do. Flying off the

[6:35] deck of an aircraft carrier is a risk. Okay? And I was permitted to do that even though it was risky. uh what and and I'm I'm not a combatant or I was not a combatant in in the Navy. I was I was a chaplain as as if you've watched the show before, you know. Uh but I was permitted to do that because it was the risk was low. uh and um it was an opportunity for me to understand what the sailors uh who were in my care faced in their day-to-day shipboard

[7:11] lives. And so, you know, that's why I was given that opportunity despite the risk. It was a calculated risk and there were benefits that came from it. I assure you I until I until I had that hop I couldn't really appreciate what the plane captains uh the things about which the plane captains were concerned exactly how they uh how they um used their authority how the pilots felt what it was like to be up there and circling

[7:46] what it was like to do an inverted dive from 15,000 ft to about 1,000 ft. The frustration of the the sort of stupid stuff that sometimes had to be done because of, you know, some other boat or ship that was in the water. All of those I could, you know, my sailors could tell them tell me about them, but until I experienced them, I didn't really I didn't I didn't I didn't really understand them, right? And so this is how the military approaches risk. So

[8:21] military commanders, they don't gamble, okay? They calculate. So every mission involves risk, but it's analyzed, it's mitigated, it's it's re it's rehearsed, there's training, and it's continuously reassessed in order to minimize the risk. So often times leaders confuse boldness with bravery and bravery with recklessness. So bravery is simply the

[8:57] ability to overcome what are the natural fears that we have. Okay? Being in combat is a frightening situation and it it's it's the the the um desire to run away is not cowardly. It's it's the natural instinct of flight. Okay, which is built into us. Bravery is the ability to control those instincts

[9:32] and do what we're trained to do. In this case, I'm speaking we we in the military. What we're trained to do. Okay? And that that is a fundamental aspect of military training. Boldness as opposed to recklessness. Boldness is the projection, the taking of risk that has been properly assessed. Now, if we're talking about the planning of an entire battle, so then it's been

[10:07] assessed by the the whole planning team. If it's a single soldier or marine or sailor who's involved in the conflict, boldness, the assessment may be in the moment, but the assessment is still made. Is is what I'm about to do is is what I'm is what I is what I'm likely to gain worth the risk that I'm taking? That's the assessment indeed. always that's the assessment. Recklessness is taking the

[10:44] action without thought about the consequences without thought about what is potentially to be gained. Okay? And the the reality is that we need to distinguish both the military and those of us in business. We need to distinguish between calculated risk and hope disguised as a strategy. like let's do this and hope it works out. That's not a strategy. Okay. That it it it it just it just isn't. Okay. So, um I have

[11:19] I have five thoughts on this topic, I think. Yeah. Five thoughts on this topic that that I want to share with you. Okay. So, first is this myth of the fearless leader. Uh so, I'm I'm I'm going to go back to my uh example of General George Patton. So, Most people think that Patton was a fearless leader. He was not. He experienced fear at times. Gut-wrenching fear. Okay? If you were to read his letters, I I have two volumes of his

[11:56] letters, collected letters, he talks about it at times, and he talks about what he needed to do to overcome that fear. And it was important for him to understand both what the fear felt like and what it took to overcome it. That's one of the things, one of the most important things that made him such a great general, such a great leader of men is he had experienced that which he was training his men uh to

[12:33] handle. Okay. So in you know in in the military okay um and and this is another aspect of of uh patent people you know he's he's well known for this sort of driving offensive uh the driving offensive nature of of how he ran third army in particular. The fact of the matter is his planning staff was constantly

[13:08] updating plans, making contingencies, maintaining optionality so that almost no matter what happened, Patton's army could respond effectively and keep at the initiative, which again is what Patton knew would result in the lowest number of casualties. Okay. So, uh you you know he was constantly looking or not not he specifically because he was in command but his his planners were constantly

[13:45] looking at where are we going to where where might we hit obstacles? Where might there be failure points? Where are where are the tough battles likely to take place? Do we need to take this city or can we just go around it and sort of leave it behind us where it it can't be resupplied militarily and it'll just kind of die on the vine? Now, that's not to say that Patent always made the right decisions. No, of course he made incorrect decisions. Sometimes he calculated risk

[14:20] incorrectly. If he were alive standing here with me, aside from being extremely old, he would almost almost certainly agree with that assessment, he never claimed perfection. And there is no such thing, especially in as chaotic an endeavor as war. But having said that, it's still it was still necessary for him and and and in particular his planning staff to work as hard as possible to mitigate the risks that they could foresee.

[14:55] Okay? And and that that is an intelligent way to fight a battle. Okay? So for a leader to understand calculated risk first of all he has to understand the downside okay it's it's easy to figure out what's often well I shouldn't say it's easy many times it's easy or pretty straightforward to understand the possible gain whether it's on the battlefield or whether it's in business right if it's the battlefield we're going to gain this objective okay if it's in business we're going to increase sales we're going to dominate the

[15:30] competition. We're going to seamlessly uh bring this new product or service to market. Okay, that otherwise why you know why why act? But what's the downside? Hey, is the downside just losing the battle or is it not only losing the battle, it's having important resources destroyed that make continuing on the offensive difficult if not impossible. Is it not just losing the battle, but seeing the momentum shift and now being

[16:07] put on the defensive, being pushed back, and now having to retake ground that was previously taken? In business, if an initiative fails, is it just that this new product that was brought to market wasn't successful, or is there reputational damage? Do people reject other products that they might have bought because they tried the new product and didn't like it and turned to some new supplier of that product. Okay, think New Coke, right? Uh so rarely is

[16:46] the downside limited to just the initiative not working out. There is oftentimes collateral, not collateral damage, I don't I don't mean that lightly. there's additional damage to be calculated in figuring out the downside. Okay. So, another aspect of calculated risk is quantifying as much as possible the probabilities of success. Okay. Now, on the battlefield, hopefully the commander has intelligence about the force that he faces. Okay. So, let's

[17:22] let's take a recent example with the the sinking of the um Iranian ship by a US submarine using torpedoes, right? The first time that that's happened since World War II, right? What was the probability of success? Probably extremely high. Probably probability rated at maybe 90%. First of all, mo I I I suspect the Iranian Navy was not even thinking about getting sunk by a tor a submarine

[17:57] torpedo, right? Um all the operations up to that point had been using aircraft. So they might have been on the lookout for aircraft. Um somebody, you know, a bombing run or something like that. They might have been on the lookout for another surface vessel to attack them. Although that would be certainly far less likely I suspect in the the the ship's commanders uh from the ship's commander perspective. But a submarine in the Indian Ocean, right? So quantifying that probability is an important aspect of calculating

[18:35] risk. Okay. Next is preparing branches and sequels. In other words, contingency plans. So, what if this doesn't work? What are we going to do? How are we going to mitigate mitigate the downside of the initiative of the action not working? Okay. On the other side, what if it does work? How what are we going to do to follow up on it and take advantage of the success? Okay. So from from a military standpoint,

[19:10] right, I think um you know, we're we're seeing in the current war in Iran that um you know that that domin um uh what's the word I'm looking for? um control of the skies over Iraq, I'm sorry, over Iran happened very quickly, potentially more quickly than was anticipated by the American and Israeli militaries. And so what does that mean, right? How do we how do they take advantage of that

[19:45] success? Right? uh and and on the other hand I it was not expected I think that Iran would attack uh its neighbors uh Saudi Arabia, Qatar uh the United Arab Emirates, Bahrain, right? So that that was a downside risk that I think may not have been um properly uh assessed. Okay, but now it's happened. So what is the what is the what is the contingency plan for that?

[20:20] Okay. How are the how do we reach out to those countries that that have been attacked? How do we know get bring them into the coalition to help with what's going on right now? The same thing is true on on the business side. you know, we need in business, we need to preserve optionality. We can't in essence push all of our chips uh into the pot and just hope that everything's going to work out on a particular initiative. So, if we're if we're launching a new product, we may have done great market

[20:56] testing. We may have high confidence that there's going to be a lot of demand for the pro product in the market. Okay? and and maybe under normal circumstances there would have but all of a sudden there's some you know some occurrence in the world and and nobody nobody's buying there's a COVID outbreak there's the outbreak of war uh you know who who knows or it may just be that our market intelligence was incorrect so what are we going to do how are we going to mitigate the down what is the downside how are we going to How

[21:33] do we how do we assess the probability of success? And what do we do in terms of contingency plans to mitigate or minimize the downside even as we realize we're not going to gain the upside? Or what are we going to do if if the product is a smashing success and and now we've got an opportunity to greatly expand sales. But, you know, perhaps, you know, did we not do we have a contingency plan for gearing up production or maybe for bringing in another producer who can produce under

[22:09] our license to get more product out there? How is that all going to work? Okay, that's all part of calculated risk in business. So, recklessness means that we assume momentum will solve all problems. Oh, we're just going to keep going and it's going to work out. No, that almost never happens. It just doesn't. Okay. It also means we outsource our thinking to optimism. Oh, you know, we're we're we're just going to we're just going to keep thinking happy thoughts and it's all going to

[22:45] work out. Okay? Or and we ignore second order effects. Okay? All of that is reckless. We need to be constantly assessing the situation, looking for the downside, looking for the unexpected upside, making plans on how we can respond to them. There there's an old adage uh that uh plans are useless. Planning is essential. And that really comes into play here when we're dealing with calculated risks. We

[23:20] need to be constantly planning, keeping looking to keep options, viable options open so we can make the pivots we need to make. Okay, let's take a quick break and we'll talk some more. When life brings unexpected changes, managing inherited property shouldn't add to your stress. Magnum Properties specializes in probate and trust real estate management. We handle the complexities while you focus on what

[23:55] matters most. From property maintenance to tenant relations, from legal compliance to maximizing value, we're your trusted partner through every step. Magnum Properties, Inc., turning property challenges into peace of mind. Call us today at 213-264-4396 or visit magnumprops.com. Okay, so next let's talk about the risk equation probability times impact. Right? So from a military

[24:33] standpoint, so first of all we evaluate the likelihood of failure. That's number one. Then the severity of the consequences of failure. Our next our ability to recover and then the strategic value if successful. Okay. So we look at those four factors. If the strategic value if successful is very low relative to the likelihood of failure, the severity of the consequences of failure and and a

[25:10] inability to rapidly recover, the risk the the probability of of of of lack of success is too high. the impact is too low and and the calculated risk doesn't make there is no calculated well there's calculated risk but it's too high and so the and so the the action shouldn't take place. On the other hand, if there's a let's say a moderate risk of failure, okay, and and even taking that into account, the severity of it won't be that great. We may lose some

[25:45] equipment. We may lose some ground. But casualties should be light if at all. Okay. We should have a a strong ability to recover that we have plenty of of of equipment in reserve. Okay. On the other hand, if we're able to break through, if the initiative is successful, we have a lot to gain. Okay. So that's a positive risk equation. And if you look at the current war in Iran, clearly that was how it was assessed. So what was the likelihood of

[26:21] failure? Well, given how Iran responded last year to having its its nuclear facilities bombed and to to the attacks by Israel, Iran did very little if any damage when when all was said and done in retaliation. Okay. It was identified as a paper tiger. Okay. So, the likelihood of failure in in the current war is low. Okay. What are the what's the severity of the consequences of failure? Well, given the objectives that that have been

[26:56] uh enunciated by the Trump administration. Number one, complete and permanent destructure of the nuclear program. Number two, destruction of the na of the Iran's navy. Number three, destruction of its ballistic missile capability. Okay, so what are what are what are the severity of the consequences? Well, um, one of the one of the one of the consequences is the closing of the Straits of Hormuz, or at least the uh purported closing of the Straits of Hormuz and and and the economic damage that could do. And we've

[27:32] seen that we've seen in terms of oil prices whipssawing that that that that is a that is a uh a potentially severe consequence. Okay. But as we've seen, Iran's ability to to launch missiles at some and such has eroded day by day over the last 12 days. So the severity of the consequences seems to be waning. Okay. So that that's that's number two. ability to recover. Okay. Well, Iran's ability to recover is attenuated at best. Okay. What is the what is the

[28:10] United States's and and Israel's ability to recover? Well, pretty high. Okay. Defense manufacturing has been uh has been stepped up and so we're able to replace munitions. Um, I believe we've only lost, I think, three aircraft, maybe four. Okay. So, while of course each plane is pretty expensive, tens of millions of dollars, in the end, uh, you know, that's not a a a crippling loss of aircraft. And and so

[28:45] we have the ability to continue to launch flight operations despite having lost four aircraft. Okay. uh and seven service members have been killed and of course for especially for their families that that's a tragedy but the casualty count has been very very low by any standard of combat operations and so the ability for the military the American military to recover from those personnel losses is also I would say

[29:20] very very strong on the Israeli side. I think there have been three or four service members killed. Um they they did a general callup of reserves. I believe 100,000 reserves. So again, although it's it's tragic that uh some soldiers uh have lost their lives, it's Israel has a strong ability to recover from that. Okay. What is the strategic value if successful? Well, I think it's nothing short of a major geopolitical realignment. So

[29:56] if pressure does cause the current regime to fall, so what we end up with is at least potentially an Iran who will not be at odds with her neighbors, who will not be at odds with Saudi Arabia, Bahrain, uh the United Arab Emirates, will will have an Iran that is not sponsoring Houthi terrorists, that are that's not sponsoring sponsoring Hamas in Hezbollah in Israel in Lebanon and and so all of a sudden we

[30:33] have potentially the opportunity for there to be a great deal of of development, economic development, um um development of people in the Middle East that has not been there for almost half a century since Iran was taken. taken over by Islamopfascists. Now that's just the sort of more localized strategic value. the the war between uh Ukraine and Russia will also be impacted because uh

[31:09] in Iran who becomes more closely aligned with the United States and her allies is unlikely to continue selling drones to Russia and and and that is one of uh Russia's major suppliers for that type of weapon. It also means uh a difference in relations with China. China gets a great deal of its oil from Iran. So to the extent that Iran again aligns more so with United States policy that will give the United States leverage in for

[31:44] example helping protect Taiwan, the Philippines and and uh other South and and countries in Southeast Asia, right? So I think it's not hyperbole to say that the strategic value of success in the war in Iran is potentially immense uh in terms of how geopolitics uh and and and the global economy may realign. And so we and so I suspect that this is the calculation that the

[32:20] president made in making a decision to launch this war. The the likelihood of failure was relatively low. The severity of the consequences was also pretty low. The ability to recover very high and the strategic value of successful was very very high. And so that's why I think we're seeing the operations that we're seeing. So from a business standpoint, um we we we look at other issues. So uh

[32:55] let's say that um part of the the risk equation is a need for capital, right? So, how like if if a business is looking to gain capital, how likely is that capital uh is is um u gaining that capital? How likely is that to happen versus not happen? Right? So I I was listening to a discussion about uh AI this morning and it's interesting because the the um person who was speaking um was comparing it to the dot

[33:33] bubble and he was explaining that the two basically have no basis in similarity. So during the dotcom bubble, there was huge risk in companies failing to gain the capital allocations they needed. And since these companies for the most part had no well had very little income and had no you know net income they were absolutely dependent on continual capital raises in order for

[34:08] them to stay viable right whereas the companies today and this is not true of every single company but especially for the so-called mag 7 these companies have enormous amounts of net income, tens, even hundreds of billions. Well, not hundreds of billions, but I was looking at a chart the other day. I think Nvidia has like $129 billion in net income a year. Okay, that's that's an enormous amount of net income. And a lot of the AI research that they're

[34:44] doing or AI funding that they're using is coming from current cash flows. they are not dependent on capital raises to do what they want to do. Okay? And we're only now over the last maybe year or so starting to see these even these large companies reach into capital markets to expand the amount of capital available for AI research. Having said that, because of their enormous resources, they have the ability to service that capital that that borrowed capital if they take it on. Okay. So, number one in

[35:21] the risk calculation for or risk equation for a business. Okay. What is how likely is it that capital allocation uh will fail? Okay. If it fails, will it kill or wound a company? Okay. Now, we know the answer in the dotcom bubble. The answer is yes. Okay. Um, in in the current situation, I would say that the likelihood is actually very low. It's it's it's unlikely that Meta or Google or um in N in N in N in N in N in N in N in N in N in N in Nvidia are going to be

[35:57] killed if they don't get the capital allocation that they're seeking, especially because it's being looked at industrywide. So if Meta doesn't get it, it's, you know, Google probably won't either. And so it's not as if one company will necessarily become dominant all the other over all the others if it gets its capital allocation and the others don't because to a certain extent I think we're going to see these rising and falling together. So the likelihood that a company will be killed I think is very very low. Might it be wounded? Perhaps perhaps there might have to be

[36:34] some strategic rethinking, some regrouping, but that's part of the natural eb and flow of business. Okay. So, can the company can one of these companies absorb the loss without losing its strategic position? Meaning, are one of the mag seven no longer going to be one of the mag seven if it doesn't get the capital allocation it's seeking? Maybe. Maybe. Okay. I would say that that's a higher possibility or higher

[37:10] probability than that the company would be killed. Um but that that would kind of fall into the wounding category perhaps. Um, but I think again it's it's relatively unlikely. These companies are all enormously profitable and you know they again they might have to scale back on their investments in AI. Um, but they're probably they're probably not going to lose their strategic position. And despite what the market is saying right now, I think that they're more likely to lose their strategic position by backing off from

[37:45] investments in AI uh than they are in continuing to pursue them, albeit in an intelligent matter. Okay. And does success materially uh improve their advantage? And I I think the answer is clearly yes. So AI is likely to be uh well I think is has pretty much shown that it's almost for sure going to be a a as as important a change in technology as the internet itself. Okay. And if you think about what

[38:20] business was like pre- internet and post internet was very very different. Okay. The efficiencies that businesses got from from using the internet, their ability to reach markets beyond their local area increased dramatically. Our ability to communicate has increased dramatically. So many things have changed, right? The internet did away with fax machines because we now had email. And in fact, email has become essentially a a legally recognized means of communication, right? We have now

[38:55] e-signing documents whereas before they had to be FedExed around or or or messenured around, right? All of this has made business easier, more efficient. Okay. Well, I don't I I'm going to withdraw the easier. It's made business more efficient. Okay. And and and that that gives business potentially more opportunity. AI is almost for sure going to do the same thing. Okay. Now, it's going to cause some structural changes in terms of employment. And actually, tomorrow on my show, People Making Money, I'm going to be talking about that. Um, so I

[39:31] invite you to tune in at 10:00 a.m. Pacific time tomorrow. Uh, but but the the um it it was likely to materially improve advantage. And so that's why these companies are taking the calculated risk that they're taking. the risk equation in investing in AI is is it probability times impact comes out positive. Okay. Next capital uh okay capital allocation is a risk strategy. Right? So, um, if we look

[40:09] at on the on the military side for a minute, how we allocate our military forces, where we place them strategically on the battlefield, all of that is part of assessing the risk and planning the operation. So, from a business standpoint, our capital is kind of like our soldiers in some way. I I don't mean to diminish people, right? People are important in business. Of course, they're crucial in business. But using capital allocation or capital as as kind of our maybe capital is our uh it would be the equivalent of equipment

[40:44] if you will in the military. So we when we think about allocating capital, we we need to we need to remember that product risk is not the only type of risk in the business. There's hiring risk, there's pricing risk, there's debt risk, there's market entry risk, there's market risk in general, there's reputational risk. All of these types of risks need to be assessed in order to make a a calculated risk assessment, right? Hiring risk. Are

[41:20] we going to be able to find the people that we need to continue our expansion? Pricing risk. Okay. I'm and and I uh next week I'm going to be talking about uh pricing risk and how um perhaps being the lowest price isn't necessarily the best strategy. Okay. Debt risk. If we have a lot of debt, are is all of our income going to be eaten up servicing that debt and and and we're not going to have sufficient capital for for marketing, for hiring people, for day-to-day operations, right? Market

[41:57] entry risk. That that's a pretty obvious one, as is market risk in general, right? What's going on? We talked about that earlier. And finally, reputational risk, right? If we succeed, okay, great. you know a reputation intact hopefully uh if we don't succeed what is the impact on our reputation right so all of these aspects of risk need to be assessed and one of the one of the I I think uh dangers if you will uh from a business standpoint is that sometimes

[42:33] businesses overinvest in ego projects right So, people ask me about my shows and they say, "Well, do you make money off of them?" And I say, "Well, you know, that that that's that's an interesting question, right? Do I do I make, you know, advertising revenue from these shows?" No, I don't. Um, and and you know, even if I chose to participate, for example, in the YouTube monetization program, what I would get from that would not cover the expense of mounting the shows. However, I continue

[43:08] to do the shows not because they're a vanity project, but number one, they they present a platform for me to talk about and share my knowledge, and that helps build my reputation. And number two, it gives me a place to invite people with whom I have business relationships so that they can share their knowledge and I can help them promote themselves. Okay, I'm being being strictly honest. That's why most people do these kinds of shows. If you go to my show, I'm sorry. If you go to my channel, Probate and

[43:44] Trust TV, you'll see there's I think 8 10 content providers on uh Trusts and Probate Administration in estate planning, right? I bet you there's not a single one there that makes a profit off their channel even though one of them has I think over 300,000 subscribers. Okay, I know Paul. I've had him on my one of my shows, right? That's not the point. The point is to help educate people on estate planning and probate and trust administration

[44:19] as a as a public service, which I think is important for our industry to do. And number two, to to let people interact with us or not interact with us but see us and make an assessment of our competency as professionals. Okay, both of those are important, right? But sometimes there are pure ego projects. So I I will admit my show Jiggers's Place which is not businessoriented. I I do that for fun. It's it's it's really it is an ego project, but the cost of doing it is very low. I do it after the business day

[44:56] is over, so it's not impinging on my work time. And I think it's it's, you know, it's a way for me to relax and hopefully help other people relax, right? So, um, it's okay to have an ego project, but not to overinvest in it. Okay. And what do I spend on an episode of Jiggers's Place? uh probably I don't know 10 20 bucks something like that you know for the ingredients for the cocktail right so the the risk is in overinvesting not in in just having an ego project right um another risk is

[45:33] underinvesting in defensive strength which is making sure you have the systems and people in place so that if there is a problem in your business it can be dealt with effectively okay I don't think businesses think about this too often, but we we need to have sort of failsafe procedures so that if things start dropping, they don't drop all the way through to the basement and beyond, right? And so that means again having systems, whether it's accounting systems, whether it's marketing systems, whether it's cash allocation systems. Okay? All of those

[46:09] need to be set so that we're mitigating our downside. Okay. Uh, another pro another risk in in from a capital allocation standpoint is misjudging runway. We may think we've got lots of time and and lots of capital and we may burn through that capital much more quickly and that's a problem, right? And so we need to be very candid, very honest with what is our cash burn, how long will our resources last, especially if we're not able to generate additional uh

[46:45] investment. And then finally, leaders oftentimes confuse activity with advantage. I've talked about this before, the do something phenomenon. Okay, probably the worst thing a business can do, especially if it's in a crisis, is to do something, okay? Because that's unlikely to be fruitful. much better to take the time if it hasn't been done ahead of time to to

[47:20] have u contingency plans and and sequels and such. Take the time to figure out what needs to be done that's effective not just what can be done in order to generate activity. Okay. So let's look at the next one. Okay. Uh so when is risk acceptable versus reckless? So acceptable risk aligns with long-term strategy. Okay. It has contingency paths. It's survivable.

[47:57] Okay. And it it increases asymmetric upside. So what what do I mean by that? So if we're going to take a risk, okay, first of all, it need the the results of taking that risk need to be the advancing of whatever our long-term strategy is. Okay. So if our long-term strategy is to continue to increase uh uh our our percentage of sales uh in a particular product line. Okay. and a

[48:32] risk is likely to do that. That's an accept that's probably an acceptable risk. Okay. If a risk will open us into a new market, okay, that needs to be looked at carefully because is opening a new market for a new product, is that really part of our long-term strategy or is that more of a vanity thing? Okay. Now, maybe we need to open up sales in a new market in and a new product line because we're seeing that

[49:07] our current product line is starting to fade. Okay, maybe the market for it is going away and so now we've we we're going to have to pivot in order to stay viable, right? So then even though it's a potentially larger risk to enter a new market with a new product, maybe that risk is acceptable because the alternative just staying with the current strategy is not viable long term. Okay. Now let's but we also need to consider what are contingency paths. If there's

[49:44] no if there's no contingency path to what you're doing, that increases the risk enormously because you can't pivot. If things start going wrong, that's it. All you've got is either complete withdrawal or continuing to bang ahead in the face of very adverse conditions. Okay? So, lack of contingency paths probably means you're straying into the reckless territory. Whereas if you've got multiple contingency paths, you're more likely to be in the realm of acceptable risk. Okay.

[50:22] Taking in assessing failure is failing. Is this initiative failing? Is it survivable? If if you're betting the farm, as they say, that's probably reckless. Okay. If it's survivable, okay, you may take a hit. you may take a, you know, 20 30% hit to your to your profit. Okay, but that's survivable. Or maybe it's not. Maybe your profit is very very low and it's not. But assuming that the downside is not going to wipe your

[50:58] company out, then it's more likely that the risk is acceptable rather than reckless. Okay. And finally, does it increase asymmetric upside? Meaning does the risk if the risk is is if taking the risk leads to success does that give you even greater advantage going forward. That's the asymmetric part of this. Right? This is this is going back to my uh comments on on General Patton. This is what he was always looking to do to increase his

[51:33] asymmetric upside by continually keeping the enemy off balance continually making forcing them to react rather than being able to respond cogently. Okay. So if taking a risk is likely to put our competitors further off balance, we're gaining asymmetric upside and that's more likely to be an acceptable risk as opposed to being reckless. Okay. Now, what are reckless risks? Well, uh one that depends on perfect execution. That's a res reckless risk because

[52:10] almost for sure execution is not going to be perfect. Okay. Re reckless risk. That's a hard thing to say four times fast, right? Reckless risk also is one that requires luck. Okay? If there's not a cogent path to success, you're relying on luck. That's reckless. Okay. A reckless risk is one that burns core strength. Okay. Burns your people out. Makes your product untenable. Damage severely damages your reput damages your

[52:45] reputation. Okay, that's another reckless risk. And finally, one that's driven by fear or pride is reckless. Okay. And that's why I say the impulse to do something needs to be controlled because the impulse to do something is generally driven by fear or maybe pride. Neither one of those are appropriate responses. Okay. All right. So, and then finally, uh why why might leaders

[53:20] misjudge risk? Well, so there are there are sort of common distortions. One is something called recency bias, right? And it it, you know, simply explained, it's sort of it sort of comes down to, well, the last thing I heard must be the best thing and so I'm going to go with that. Okay? And this is problematic because just because you've gotten some more recent information doesn't mean that it's better information, that it's more likely to happen. If it's a an

[53:57] assessment of success, okay, it may have overlooked other things that a previous assessment included. Okay, so information and assessments need to be looked at kind of globally is almost too strong, but they they they need to be looked at broadly so that we're not letting ourselves be swayed by the last thing we heard. Okay. Uh another reason that uh leaders misjudge risk is they they're overconfident because of past successes.

[54:32] Okay? And you can you can see that oh you know we've always been successful in the past so we're going to be successful this time. Okay. That's the new coke thing. Okay. Enough said. Okay. Uh another reason uh uh leaders misjudge risk is they're getting pressure from investors or competitors. You're falling behind. The investors say, "You need to do something." All right. No, not necessarily. Okay. Sometimes the most effective thing we can do is let our competitors burn themselves out and they they've damaged themselves

[55:08] because they took a reckless risk and we if we just stand pat, we come out great. Okay. So we can't let ourselves be panicked by investors, by competitors, by you know people on our team. Okay, we need to keep a cool head so that we can properly assess risk. And finally, sometimes we get emotionally attached to an idea. Okay, now I'll give you a an example from my career when I first launched the Wade to Wow shows.

[55:44] Um, if you remember that first season back in 2020. So, I got my production team together with my longtime producing partner Rick and we turned my living room into a TV studio once a month and shot multiple episodes. And I loved doing the show that way. Uh, I brought in uh guest bartenders uh who made a a themed cocktail to the topic of my guest. It was a lot of fun. High production value. got to work with great people. The problem was it was too costly. That was an overinvestment in a

[56:22] vanity project. Okay. And yet once I realized that and and and shut production down, I just I I I really struggled to emotionally detach myself from that concept of the show and turn it into a more conventional video podcast. Okay. And but that's what I needed to do. Okay. If I had let myself be stay emotionally attached and continue to spend money in in the the way I was originally producing the show, that would have been reckless. Okay?

[56:58] That would not have been a calculated risk. Okay? And so just like military planners use red teams, they war game, they they do afteraction reports, afteraction reviews, I I should say, and and they they they have structured means for um getting dissenting opinions. We need to do the same thing in our businesses. Okay? We don't want a lot of yes people working with us. We want people who are going to say, well, you know, but what

[57:34] about looking at it this way? What about looking at it this other way? Have you considered this factor or this other factor? We want those dissenting voices because that is what will help us make proper calculated risks. So the most dangerous leader is not the cautious one. The mo the most dangerous leader is the one who's overconfident and mistakes adrenaline for strategy. That's true on the battlefield and it's true in business. So I thank you very

[58:10] much for joining me today. I really appreciate it. And let's see. I already mentioned tomorrow 10:00 a.m. Pacific time is my show People Making Money. I hope you'll join me. Remember on Thursdays, My Vanity Project, every other Thursday at 5:00 PM Pacific time, my show Jiggers's Place, we have a cocktail and a smooz. And if you have comments, uh questions, criticisms, uh links to social media, and my email address will be in the show notes on uh on uh YouTube, uh Apple Podcast, and Spotify. So, please feel free to to post

[58:46] those. If you like the show, um, please post a positive comment. I would really appreciate that. That helps me potentially gain new subscribers and and help more people, which is really one of the core reasons I do this show, as I mentioned a little earlier. So, I wish you a wonderful rest of the day and signing off as I always do. Marie darling, you are my bell. Courage at all times, my friends.