Was it bad luck or an asymmetric risk trap?

Pickleball injuries are creating $250 million to $500 million in medical costs annually, UBS analyst Andrew Mok estimated after assessing data from the Sports and Fitness Industry Association

I started playing pickleball regularly about a year ago. In an effort to not to add to this statistic, I looked into how to stay safe. Google’s advice was predictable: warm up and cool down, wear the right shoes, learn proper technique, build strength, and stay hydrated. Pretty standard advice. But many skip these steps with pickleball. 

Most people that first play pickleball treat it as a recreational activity like corn hole or bocce ball. As a result the sport often attracts a wide array of participants, many who are older, out of shape and injury prone. It’s often first played at conferences or while on vacation at a resort. While it’s easy to pick up, it can be quite taxing. Imagine a 60-year-old who doesn’t exercise regularly playing basketball without warming up in flip flops. Injuries would be inevitable. While rare in other sports, this happens often in pickleball.  

This is an example of what I call an asymmetric risk trap, an activity or investment with little to no upside but potentially massive downside. Unlike free lottery tickets with minimal risk and big upside, these traps are the reverse. The danger often isn’t in the activity itself, but in how it’s performed. They fool us because the activities themselves may not be risky. Pickleball? Not risky. Pickleball in flip flops without warming up? Potentially very risky. Crazy coincidence. While proofreading this article, my nephew just tripped and broke his Apple watch while playing pickleball in Crocs! I told him to wear proper shoes and he didn’t heed my advice. Fortunately he is ok and didn’t get hurt.

With risk traps, people assume they were just unlucky. But usually, the risk was entirely predictable and avoidable. I see this often with local real estate developers. Their projects are typically financed with large loans with personal guarantees. As long as the market remains stable, they will make a tidy profit on most projects. But if the market dips, they will suffer significant losses. Many of these developers roll all their profits into larger and larger projects. Eventually, prices dip and they lose everything. Unfortunately, many of these developers don’t learn from their mistakes and get wiped out every cycle. They assume they were victims of bad luck, when in reality they repeatedly fall victim to the same risk trap, the downside risk of leverage in a cyclical market.

Young people, especially teenagers, are particularly vulnerable to risk traps. Categorizing risk well requires pattern recognition, and that takes time. When I reflect on arguments I’ve had with my kids, many boil down to risk traps.

I have a recurring argument with my daughter about wearing AirPods when running. When she was younger, it felt especially risky. She was small and less visible to drivers. With music in her ears, her awareness was reduced, and she might not hear an approaching car. As she grew older, I eased up, but with exceptions. Running with AirPods at night or in unfamiliar locations still posed unneeded risk. To her, I was being annoying. To me, these were obvious risk traps.

Many common activities are prone to becoming asymmetric risk traps. Consider these examples.

So how do you avoid risk traps? Develop a habit of spotting them early. Here are a few helpful tips.

1. Look for risk traps. Start by simply looking for potential risk in the activities you partake in. Risk isn't always loud or obvious. Like any skill, your ability to detect risk improves with repetition and reflection.

2. Contemplate the worst case. Ask yourself what is the absolute worst that could happen and how comfortable you are with that outcome. 

3. Assess likelihood. Just because something could go wrong doesn’t mean it will. Would negative outcomes be freak accidents or common occurrences? If they happen often, proceed with caution. 

4. Can it be avoided? Before you commit, look for simple ways to reduce or eliminate the risk. Is there a smarter approach or precautions you can take? Reducing risk doesn't make you timid. It makes you strategic.

5. Consider permanence. If things go wrong, how long will the impact last? Some risks bring temporary discomfort. Others can have lasting consequences. Knowing the difference helps you choose when to act boldly and when to hit pause.

Each of us has different values, goals and comfort with risk. One person’s calling may be owning an art gallery while another’s may be racing as an F1 driver. Avoiding risk traps is not about avoiding risk. The key thing to remember here is that the risk trap is not necessarily the activity, but how an activity is conducted. The goal is to take smart risks and avoid bad ones. 

This past weekend, I took my own advice. While driving my daughter home, I felt fatigue setting in. I pulled over and took a five-minute nap. I was tempted to push through. I was only 20 minutes from home, but I realized I was falling for a risk trap. In past articles I have discussed the value in seeking free lottery tickets. The flip side is just as important. Spotting danger early can be as valuable as chasing opportunity.

Sangeeth Peruri - Jack of Many Trades, Master of None
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