Mental Model Mondays #3: De-risking

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Hey friends, hope we’re all keeping well.

This week I want to discuss a concept I believe we should all learn about and keep in mind- de-risking.


💭Concept💭

De-risking is something usually discussed in a business context, but also has plenty of real world applications.

The process of de-risking involves making something less risky, making something safer, or to minimise the probability of failure of something. It’s pretty much in the name, actually🙃

Typically in the business context, it involves ensuring money won’t be lost.

Ultimately, to be wrong less, you also need to be testing your assumptions in the real world, a process known as de-risking. There is risk that one or more of your assumptions are untrue, and so the conclusions you reach could also be false.

‘Super Thinking’, by Gabriel Weinberg & Lauren McCann

🧐Examples🧐

-In business, investors will usually try de-risk their portfolio whenever they can, but mainly in the face of a looming crash. This mostly involves diversifying their portfolio, by spreading the risk of crashing across various different assets. This way, the damage will be spread out and not hit too hard, than if you were to ‘put all your eggs in one basket’.

-If you were to come up with some kind of new product and wanted to assess how it would do on the market, you would de-risk the product by gaining feedback from a test market, i.e let people test the product and give you feedback for it, allowing you to make necessary improvements and reducing the chances of failure of the product’s launch.

-A very good example comes from this article as well.

If you begin to notice one of your friends starting to hang around the wrong crowd, or if they start turning bad and hanging out with them becomes more to your detriment than to your benefit, you may have no choice other than to stop interacting with this person, and end the friendship. That’s a way of de-risking your life. A relationship with that person will bring you no benefit, and may even be dangerous.


Cool, that’ll probably even do it for this post.

I’ll hopefully see you in another post, stay safe👋🏼

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