Understanding Risk to Reward

No other athlete more fully understood the Risk to Reward analysis as well as former professional baseball player Reggie Jackson.

“I have struck out more times than any player in Major League Baseball history…but you can call me MR. OCTOBER!”

Reggie Jackson actually never said this quote…but wouldn’t it be great if he did!

We all conduct a risk to reward analysis every single day, multiple times a day, throughout our entire lives. What is the reward for driving over the speed limit to get to work on time versus the risk of a speeding ticket, as well as really being late to work? What is the reward of brushing our teeth daily versus the risk of cavities and bad breath? And so it goes.

In the business world, risk to reward analysis is simple: how much potential profit can you make and how much money must you risk to achieve that profit? If you invest $100,000 in a real estate deal with the hopes of getting back $200,000, your risk to reward ratio is 2 to 1.

Now, back to Reggie.

There are multiple outcomes every time a baseball player steps into the batter’s box. The worst possible outcome for the batter, with the possible exception of a beanball to the forehead, is the dreaded strikeout. If you don’t put the ball into play, nothing good can happen.

Reggie Jackson has struck out more times than any other player in the history of the game with a total of 2,597 strikeouts over 21 seasons. With such a dismal record attached to his stat sheet, why is Reggie Jackson considered to be the most clutch player in the history of the game? Let’s take a look at the numbers.

Reggie Jackson has 2,584 hits in his career to go with those 2,597 strikeouts. These results would appear to register at slightly less than a 1 to 1 risk to reward ratio. A closer look at the numbers, however, will shed light on the real answer. When factoring in doubles, triples, home runs, walks, and hit by pitches, Reggie Jackson’s risk to reward ratio skyrockets to a phenomenal 2.44 to 1.

But even this stat doesn’t tell the real story. Do you remember what Reggie Jackson did on his 2nd at bat in the 5th inning of the 12th game of the 1969 season?? Neither do I. But I do remember what he did in Game 6 of the 1977 World Series…he hit three home runs on three consecutive pitches to help the Yankees clinch yet another World Series Championship.

Of course, any businessman who knows a thing about baseball will point out a multitude of flaws and inconsistencies in the Reggie-Risk-To-Reward nonsense. That’s not really the point. The point is: all of life’s rewards come with some degree of risk. When it comes to the game of life, you can play it safe and scared; or you can play the game with confidence and gusto. Reggie Jackson chose the latter and he ended up with five World Series rings and a plaque in Cooperstown!!