Lotteries, mortality and legal risk

Humans are terrible at estimating risk.

This is pretty well known, but there is a good illustration in an article I came across a while back called The arithmetic of risk by IC McManus (published in the QJM Journal of Medicine).

The whole article is worth a read, but the central proposition is striking for anyone buying a lottery ticket:-

The chance of winning is about 1 in 14 million, which is much lower than the risk of dying before the week's lottery is drawn.

This is the case however old you are and however soon before the draw you buy your ticket (or almost... as the article explains in more detail).

The thing is that people don't really believe this. They may accept it as an academic fact, but they will still prioritise buying that Euromillions ticket over making a will.

The same thing happens with legal risk (the risk that you will fall out with your business partners, the risk that the bank will call in that personal guarantee). This isn't surprising: after all, entrepreneurs who focus on the downside risks are unlikely to get far.

This risk of failure, like the risk of dying before the lottery is drawn, is an uncomfortable one to confront. Good professional advisers will force you to do it, but even if you are just starting out and going it alone it pays to ask yourself the same question:-

Are you being realistic about the legal risks... and have you done what you can to protect yourself?