Judging Ideas by Their Risk Curves

You can be uncertain about a project. You can be uncertain on the details of the future of a product’s success. You can be uncertain about the side-effects of your business decisions.

But you can get a sense, in broad strokes, about what you’re heading into. For that, you can learn a bit about dynamics. The dynamics of risks.

There are two broad types of risk.

The first: a risk that tends to make a situation worse with time, unless you put in constant corrective effort.

The second: a risk that tends not to get worse, is costly in a stable but predictable way, but could get very beneficial.

The graph of the first gives you a curve that has a max, a ceiling, and goes down inevitably as time passes. The curve is concave in shape.

One example: a custom software project done for a single client with no shared alignment on the return on investment goals. That project tends to have its costs go exponential. In this case the graph shows the net cost/benefit, and it goes down as costs tend to balloon.

The graph of the second, gives you a line that stays stable, shows a constant cost floor, but given time, could eventually go exponential in the plus direction. The curve is convex in shape.

An example for this one: publishing a piece of content consistently every week.

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It turns out you can get a rough sense of the direction of the risk curves.

You can try your best to reel in the risks of costs for a custom software project where the client that doesn’t quite know all the details of what they want, but you can know that this type of project will tend to go exponential in the wrong direction.

You can feel like you’ve been wasting your time publishing every week for a year with nothing exploding in terms of success, but you know the risk curve benefits those who stick with the habit.

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Stay away from projects that you’ll need to match, with high fidelity, what someone else designed. You know some details weren’t communicated.
Keep that community project on your low-cost hosting. It could take off.

Stay away from dependencies on third-party systems that are controlling a large market share. They could reproduce your functionality as a first-party feature.
Keep the high-priced but sharply useful evergreen informational product. It costs you little to keep it up there to be found.

Stay away from stating a fixed price on a purely engineering project. You’re limiting to raw output the value you’re providing.
Keep preparing fixed-priced proposals on projects involving a high degree of interpretation, that guarantee an outcome, but are high priced.

Stay away from working with people you can’t tolerate.
Keep investing time in finding people you’d work with even if you wouldn’t get paid to do so.

Spot the risk curves.