The Fiscal Factor

I remember the exact moment I saw my first shark underwater. I was about 108 feet deep when out of the blue a tiger shark appeared. I can’t lie, my heart started pounding against my chest thinking that the shark would come and eat me for it’s afternoon snack. The truth is, sharks rarely harm humans but thanks to movies and stories, most of us think they’re out to get us. I felt that fear too, even though logically I knew the actual risk was low.

This is just like how people react to the idea of investing in stocks or starting something new, they freeze because of what might go wrong, not what is likely to happen.

Many people let fear keep them away from the stock market because they hear stories of crashes, just as people avoid diving because of stories about sharks. In both cases, the actual statistical risk is often lower than we think but loss aversion, which is our tendency to fear losses more than we value equivalent gains, holds us back from opportunities that can help us grow.

In economics and finance, we constantly talk about risk and reward, expected utility, and diversification. Yet, these terms feel abstract until you’re in a situation where you need to apply them. Diving with sharks is a real-life lesson in risk assessment. You plan your air consumption (resource allocation), check currents (market conditions), and monitor your equipment (risk mitigation). You don’t enter the water without preparation but you don’t stay on the boat just because there’s a chance something might go wrong. 

Diving also taught me the importance of diversification. You don’t dive in the same spot every day because conditions can change and neither should you put all your resources into one asset class. Just as divers spread their experiences across different sites and conditions to maximise learning while managing safety, investors diversify portfolios across asset classes to spread risk and increase the probability of stable returns. 

Seeing the shark itself was like witnessing volatility in the market. Your heart rate spikes, you feel alert, but if you panic and swim away quickly, you consume more air (your resources deplete faster) and you risk turning a manageable situation into a dangerous one. Similarly, in finance, reacting emotionally to volatility often leads to losses that could have been avoided with a calm and informed approach. That dive taught me that risk is never going to disappear, whether it’s in the ocean or in the economy but avoiding risk altogether doesn’t protect us instead it just limits what we get to experience and achieve.

Fear and risk will always exist, but with preparation, awareness, and the willingness to take that step, we give ourselves the chance to experience something incredible. That’s what calculated risk is really about, not diving in blindly, but not letting the fear of what could go wrong stop you from discovering what could go right.

And honestly, if I hadn’t taken that dive, I would have missed out on a moment I’ll remember for the rest of my life.

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