Devoted to Managers and those that seek to improve their management skills

The tremendous struggle and problems being faced by online banker and broker E-Trade, shows what can happen when we follow the herd because we see revenue and profits far higher than usual. As I mention in the headline, its the "Seduction of Possibility."

We must know the difference between true opportunity and false opportunity if we are going to go ahead into risky ventures.

As mentioned here, E-Trade (ETFC) CEO Mitchell Caplan challenged the company to triple its loans outstanding. That's another way of saying to take on riskier loans.

While I don't have any problems with risk in general (being in business is a risk), not properly identifying, evaluating and properly managing risk is a way to lose a business or management position quickly.

A true or false opportunity doesn't refer to a scam or con, rather it refers to properly evaluating the level of risk you take on, and building your strategies around that. If you don't evaluate risk properly, there is no way you can manage it: it's as simple as that.

For a financial company like E-Trade, they should have had someone with the expertise to evaluate the risk correctly. Of course we could say that about the huge financial firms that did exactly the same thing also. The only difference is they had the financial resoureces to cover the mistakes they made - although barely.

That's not an excuse, as some of the CEOs lost their jobs over it.

Possibilities are only that if we correctly and accurately evaluate the risks involved with them. If we go outside of what we understand, or do things because our competitors are temporarily getting huge profits, we are opening ourselves up to a crap shoot. We may as well toss the dice and make a decision that way.

As any healthy business and leadership will do, stay with what you know. If you want to look to other growth areas, thoroughly investigate and only enter in the space in a smaller way - to learn it and grow as you learn.

If you can't figure it out after evaluating, drop the initiative. It's far better to occasionally lose on a growth opportunity, than to miscalculate risk and potentially lose everything.