speaker-0: So think like, can I survive the downside? How long is it going to take me to recover? Is there a margin baked into this? You know, to your point. It's I don't think it is a one size fits all. But there is an intentional way you can evaluate, in my opinion, knowledge is power. So the more you can educate yourself about the subject matter or whatever it is you're pursuing, and then have the framework of. Okay, well, let's play these scenarios. This is all the upside opportunity, but what's the downside? And how am I evaluating each downside according to that upside? And and how risky is each one? And what are the primary downside factors or you know, the secondary and really do a thoughtful analysis is going to help you put yourself in a better situation. Welcome to Return on Design, the podcast where beauty meets strategy. And interiors become assets that perform. I'm your host, Rachel Niederhofer, designer, investor, and builder of high-impact spaces that deliver real results. Alongside my husband, I run both a design firm and a real estate investment company, where I live at the intersection of creativity and ROI every day. Each week, I'll be unpacking what most people overlook: how strategic design decisions can grow your investment, elevate your lifestyle. And unlock the full potential of your property. You'll get real tools, proven strategies, and unfiltered conversations with industry experts who are doing it right. So if you're ready to invest with purpose and leverage design as a powerful tool, this podcast is for you. When uncertainty shows up, what is your first instinct? Do you pull back or do you lean in? Because the biggest difference I have noticed between people who build wealth and people who stay stuck is not about intelligence or even about resources. It's how they respond to uncertainty.

speaker-1: Exactly. Especially when, you know, the market gets shaky. Everybody sees the same headlines, you see the same interest rates, you see the same markets, but not everybody makes the same decisions about it.

speaker-0: So on today's episode, we are going to be pulling the curtain back. We're going to talk about what risk really looks like for two very different people who make decisions together specifically around risk.

speaker-1: Why learning and you know, also like learning how to navigate that uncertainty because one profile's not necessarily always better than the other, they have to work together.

speaker-0: So welcome back to the show. Let's dive right in. So let me open it up with you with a question for you. What do you think about people, how they respond naturally to risk or around uncertainty?

speaker-1: I think when there's uncertainty, there's really two different mindsets. You have people who look at look at things and they're maybe more set on the protection or they're a little bit more risk adverse. And then you have those that look at look at that uncertainty and they're like, What is the opportunity? What's the upside here? And those are the ones that you generally would kind of consider as more ⁓ the bigger risk takers. Or ⁓ more risk prone. Yeah.

speaker-0: More risk prone. Yeah. Not necessarily the ones that wanna jump out of an airplane just for the thrill of it.

speaker-1: And honestly, neither one of those two mindsets is wrong. You need both. And living in one versus the other is where you can kind of get into a little bit more of a stickier situation.

speaker-0: Like one person typically looks through the lens of like all the things that could go wrong. Almost doomsday mentality. Like and the other might be looking through the perspective of what's the opportunity here? Like I see potential and there's sort of a vision casting.

speaker-1: Yes, and they they have to they balance each other out, honestly.

speaker-0: But I do think that there's this naturally wired aspect to each. Like there are people who come by it more naturally on the risk prone and those on the risk adverse. Yeah. So really learning how to number one, recognize where you fall on the spectrum, if you will, and then how to maybe step into more of one or the other.

speaker-1: Yeah, because I think when when you live on one side of that aisle, you you miss a lot of things. Like, ⁓ you know, the the person who's maybe sees more of the upside, more potential, more is a little bit more prone to take that risk, you know, there are risks that you may take that you didn't need to take. And those can hurt you. And the one that sits there and says, ⁓ it's it's not the right time. I can't do this, I need to you know, everything we pull out, you're gonna ⁓ that person's gonna miss opportunity.

speaker-0: Yeah, you can become stagnant. Exactly. And really in an entrepreneurship aspect, you've got to be able to navigate both. You don't want to be so risk prone that you are setting yourself up, you know, in a vulnerable way. But to your point, you don't want to be so risk adverse that you become paralyzed and never move into the next.

speaker-1: And never make a move.

speaker-0: Is exactly why it's not that entrepreneurs, you know, love risk, but they do tend to look through the lens of understanding uncertainty and really hedging and evaluating risk from a different standpoint of it's not that we don't want to step into something that might be risky or feel uncertain, but we're also evaluating the downside with the upside.

speaker-1: Yeah, entrepreneurs aren't more ⁓ they're not more comfortable make taking big risks, but they are more comfortable making decisions to move forward when not every answer is available. You know, they're they've they've learned to gather the inform all the information that is there presently and make the best decision for the outcome or you know, to get the outcome that you're striving for based on the information you have.

speaker-0: Yeah. Which is actually a really good example for real estate investing. When you're when you're in a position of buying a property and putting out an offer on a property, that is essentially the mindset up front is I'm taking this risk, if you will, by putting this offer out, but I'm also hedging that risk on the backside by putting in, you know, different ⁓ timelines and stipulations that would allow me to evaluate that risk with greater, you know, information and be able to determine is this something I want to hedge or do I want to move forward?

speaker-1: Exactly. I mean, we're not looking for guarantees. There is no guarantee in the deal. You know, and and as entrepreneurs, as investors, you know, we're not looking you can't mitigate every risk, but you can make strategic, yeah, well thought decisions about the risk and you can hedge there. There are risks that you can hedge in it. Again, yes, with what timelines? What am I what factors am I taking? What kind of margins am I looking at? You know, all the things and that's what people don't see as like When we're when we're making these deals, when we're going after these opportunities, you know, so many people think, ⁓ you're you're just taking a big risk. Well, I'm taking a risk, but I'm also trying to mitigate how much risk I'm actually taking. Cause, you know, yes, I see the potential upsides, but I also see the downsides. And I'm trying to mitigate if if that downside does hit, it's not gonna take me, it's not gonna take me out. It's not gonna take me down.

speaker-0: Well, and you also have to be able to move quickly. Exactly. Because time is money. And, you know, you might be in a competitive market where people are getting multiple offers. So you've got to make an informed decision that might feel risky. You may not feel like you've got it all figured out yet. You put the offer out and then you hedge that on the back end, allowing yourself to give a more thorough evaluation process. And determine if that risk needs that hedging of the risk needs to be adjusted in any way before you fully solidify it. And I think that's important to bring up because we talked about if you don't actually take up some level of risks in a when you feel uncertain, you're gonna get stuck. You're gonna feel you're gonna be stagnant. You're not gonna be able to put forth an offer on a deal and potentially get the deal because it may not feel perfect in the moment. And so that's sort of a I guess mindset around like relinquishing the the perfect because that s uncertainty for somebody who's more risk adverse, they they might be after that perfection that I know without a shadow of a doubt this is exactly what I want it to be. And the entrepreneur mindset, you've got to be able to move quickly and pivot quickly. And that is part of hedging the risk so that you don't become so stagnant.

speaker-1: Yeah, exactly. I mean and and with it, like looking at things and trying and not being stagnant. I mean, you go back to the old saying, you miss one hundred percent of the shots you don't ever take. Yeah. And if you never take a step, you'll never go anywhere. Yeah. And I think, you know, we can go into that, like you can look at so many with with that kind of mindset, I guess. You can you can look at so many different entrepreneurs and things that have happened you were Telling me here just not too long ago. I mean, Dyson had how many prototypes that he did before Dyson the well known Dyson vacuum cleaner became w the household name that it is today.

speaker-0: I think over five thousand.

speaker-1: Yeah. W D forty got its name because that was the fortieth rendition of his formula for the product before it actually worked. Right. Airbnb got started by two guys renting air mattresses out of their house. They took it they took a step. Not everything worked perfectly every time up front, you know, and and that's the that's the other thing I think you have to take into consideration with it is that

speaker-0: Formula. ⁓

speaker-1: Just because it didn't work exactly the way you thought the first time or that it's it's not a failure. It's learning. And you learn from your mistakes or you learn from you know where something didn't go a hundred percent according to plan, so that you can tweak and your next plan gets even better and you get better and you get stronger and you get faster and and you build.

speaker-0: Mm-hmm. And that's like the art of the pivot. Exactly. Because pivoting doesn't mean I'm going in a completely different direction. Pivoting is, you know, there's a there's a constraint, an obstacle, a barrier in the way I'm I'm going. So I'm going to just shift a little bit, tweak what I'm doing to a certain degree. And as an entrepreneur, you got to be able to pivot quickly. Cause yes, sometimes You're going, going and and it's not working the way you thought. So you pivot. You pivot.

speaker-1: Yeah, it's ⁓ it's those it's those minor corrections. Like I heard a I heard an interesting ⁓ statistic, or not a statistic really, but it's ⁓ an analogy towards this that said an airplane flying for every one degree off course they are for an hour, they miss their landing zone by sixty miles.

speaker-0: Wow. That's significant.

speaker-1: That's that's huge. Now you think one degree is very, very small. I mean, it's it's a very, very minute correction. And to make that one degree correction is not hard, but it does take that little bit of pivot and seeing that, hey, I'm off a little bit here.

speaker-0: And really that is also the reality of construction. Because you have this plan, you've got this target, whether you're, you know, working off your architectural and your design plans, however, wherever you are in the slice of construction, there's a lot of pivoting that goes down. Yeah. Because once you start to really get into it, start taking down walls or start, you know, erecting walls. You're you're pivoting. You gotta pivot here.

speaker-1: Yeah, you see you see where something maybe isn't one hundred percent to what you thought in your original plan. And it's you know, again, that's it's not a failure. And you know, that that failure or setback is not, you know, it's not the opposite of success, but it is an opportunity to learn and make your adjustments and and that is where, you know, if you're paying attention, you learn and you grow.

speaker-0: Yeah. But if your mindset is very risk adverse and you think every obstacle means I'm going in the wrong direction or this doesn't feel safe enough, then you are going to be stagnant and you're not going to be able to penetrate and really build the wealth that we're talking about. But let's segue here because I know people probably want to know when it comes to you and I, how would you define our risk profiles?

speaker-1: I mean, we we have very, very different risk profiles. ⁓ you know, you you see the potential constantly. ⁓ this is gr this could be a great opportunity. This could be a great deal. Yeah. You know. Very often. I on the other hand, you know, with some of my background, I I am I am the one looking at the if that doesn't work right, how can we pivot? Where's where's the downside? What, you know, how do I protect that? And you know, again, it's not that your thought process is a hundred percent right or mine is a hundred percent right because neither one of them are. But they do need they do work together and need to work together because again, if if you made every decision on it, we'd probably chase some deals that we really shouldn't. Yeah. And if I if I analyze every deal the way that I do, we probably wouldn't make deals that we really should.

speaker-0: Yeah. So let's break that into an example because it's it's how we're viewing an opportunity that's typically different. Like if if we're looking at a house, let's say, yeah, ⁓ purchasing a a home, I'm looking at it through the lens of to your point, what is the potential here? It is this something we can reinvent or recreate. ⁓ From a design aspect, usually, that's going to give us a competitive edge or help us set this apart in the market. So I'm thinking of it from how can I apply my skill set, this vision that I'm carrying into and bring it into reality that's going to actually give us a return that's that can compete. That's typically how I'm viewing it.

speaker-1: Yeah, and I'm looking at, well, what's the cash flow? What's the debt gonna be? What how what's our exit strategy? Are we are we holding it? Are we selling it? What what are we doing here so that I can, you know, dissect where what pitfalls we need to avoid or where where we can manage what? Yeah.

speaker-0: So I would say like we're we're looking at it differently, but yet it's all interconnected and cohesive for final decision. Yes. If the numbers work as an example, but there's you know problematic design features that would make the numbers not work by correcting or something, then we would usually agree to be like we're gonna have to pass us some by because it's too risky. Yeah. Too much risk. So there is a level of like defining how much risk can you take on.

speaker-1: And

speaker-0: What are the market factors that are affecting, you know, potential buyer behavior? Like right now, interest rates are higher than they have been, although they did just come down. But, you know, there is sort of this perceived from a buyer standpoint where like some people are just waiting, waiting, waiting. Yeah. And ⁓ that is something we're considering from a from a risk-hedge perspective. But on the ⁓ more ⁓ risk Prone, I guess you could say, is now is a good time to buy. Yeah. It is a buyer smart.

speaker-1: So now I have the opportunity to actually maybe get something for a better price, even though interest rates are a little bit higher right now. I can still get it down and there's still room to work. Yeah. And and move the needle.

speaker-0: about how you're looking at the situation. Yeah. ⁓ but yeah, I I would conclude with that that our differences, I think, make us more of a powerful tool together. And for our listeners, like you don't have to be, you know, even if you're not working with your spouse and you just have a a business partner, you don't have to think alike all the time. And you really should probably not think alike all the time because you want to partner with people who are better at something that you're not better at.

speaker-1: Yeah, I mean, as as it says, iron sharpening iron. I mean, my my risk approach makes you consider certain risks a little bit differently, but yet at the same time yours does for me. You do the same for me. And so that we we become more in in balance and in tune with each other. And we can also understand what each other's looking at better when we're as we're evaluating each and every deal. Because each and every deal is differently and we don't evaluate evaluate every project, every decision the same way. Because it you know, this one's in this area, this one's over here in this area. It's a different cost, it's a different, you know, so many factors. They're not they are not the same deal. Right. So I can't evaluate them all the same way.

speaker-0: This is really what return on design is built around, if I'm being honest. There is this unconventional path or which honestly it's more of a robust resume, if we're being honest. Where I have the mindset of this financial background from my corporate career and my educational studies. And I've landed in the world of interior design, and there's all this creativity and vision. And as I continue to refine. that profession and you know our real estate investing aspect. So there's there's a lot of factors to how I think about design, how I think about entrepreneurship, and how I honestly think about risk. And I bring that up because this whole return on design methodology is really about educating In order to hedge risk. I mean, you go through a very intentional process, like in the blueprint, as an example, our return on design blueprint for our listeners. If you're unfamiliar with it, I've created a framework through this blueprint, my return on design blueprint, where I help you go through a very intentional process of assessing, diagnosing. And evaluating in order to reach real goals. And in interior design, this is like the heart of the programming phase of the design process. And as you dive deeper into these diagnosing efforts when you start a project, it doesn't matter if it's a new build, a renovation, or, you know, even just an individual room. This process helps you to understand what you're really working with. And make informed, educated decisions. And through that understanding is where you begin to see, well, what is the risk associated with these decisions? And so as you go through and you identify your problems and then a solution for the problem, you're also simultaneously exposing any risk that could be present. And then you're building out an actual plan, hedging that risk. That's how I think about it. Yes. And even when we do ⁓ you know, design for other people or or we're renovating a property or something, I'm I'm still evaluating through the same lens. It's how I see it as a whole picture. I'm not just looking at interior design as an isolated factor, applying interior design to solve some problem that I've identified or to reach a goal that's been established.

speaker-1: good.

speaker-0: And that goal is always the end factor. And there's risk, if you will, associated with how you reach that goal. And so it's a mitigation process throughout the whole execution of trying to hedge the risk so that we achieve whatever we're trying to achieve. But the hedging of the risk is where you're gonna really get that return and be able to hold on to that return. You know, in my finance background, I used to work for a portfolio management company. So it was a private asset company. And ⁓ what that means essentially is they had ⁓ financial based portfolios. And there were all these people who would, you know, analyze whatever assets were within the portfolio. And the whole intention is to evaluate it for what is the potential opportunity for this company within this, you know, portfolio package. And what is the risk? And how are we going to hedge the risk? Most of the time, the hedging effort comes from diversifying the portfolio. Yeah. So if you're buying into this portfolio, the goal is that you are going to grow in your investment. Meanwhile, on the back end, people have a plan for that growth to happen. But it that the plan for the growth or the goal to be achieved does not come without the very intentional oversight of hedging the risk. the mindset framework that I'm articulating. I'm how I view projects, how I view assets in general, it's that financial background of opportunity, forecasting opportunity and pursuing it, you know, aggressively, but not apart from hedging risk. Because everything in life comes with risk.

speaker-1: It does. It's risk dry getting in the car and driving down the street to the store. Exactly.

speaker-0: And you hedge that risk with a seatbelt and airbags and speed limits and all the things that are in place to try to mitigate any extreme risk situation. For our listeners, if you can wrap your mind around like this is how you have to view this, because if you're only viewing ⁓ interior design as an example from an end pretty aesthetic, you know, you're you're missing it, in my opinion, because there's a lot more depth and Yeah, depth to how you should be evaluating it. And from an entrepreneur standpoint, it's not just, ⁓ I'm going to risk it all to start this business. However, it does require, you know, if you're gonna really pursue purpose and your dreams, odds are you're gonna be pushed out of your comfort zone and you're going to have to step into a level of risk that is new to you. And then as soon as you get that under your belt, you're gonna wanna go further and you're gonna step into another level of risk.

speaker-1: And you know, just for clarification on that too, it's not like as an entrepreneur, entrepreneurs are not out looking for the what's the next big risk, you know, that we can take. I know that's certainly not what we're doing, but what we've what we learned to do is mitigate those risks and how can I protect what I'm building and and gain and continue to grow what I'm building here. Yeah. Entrepreneurs don't love big risks. They love how can I protect it? And a lot of times actually are looking Even looking for the ways of why should I not do this deal. Right. I know I know every deal that we look at, we yes, we look at what is the potential upsides, what is how big can this be? What's maybe an expected range for that it could be in? What's a low-end range? But okay, what are you know, we also have to look at what am I missing? What what do I not see? What could go wrong here? And can I really protect and hedge that part of my risk? And that's something that, you know, with my Engineering corporate background, that's what I had to do. If this goes wrong, this is millions of dollars down the drain, or worse.

speaker-0: Well, and it's a mindset. It's how you train yourself to evaluate. Once you learn how to s it' to view the world through that lens or view the, you know, scenario. Yeah. Then it becomes a practice where you can evaluate and take it over and over and over.

speaker-1: I'll take that a step farther. My my job was to look at what what could go wrong and if it went wrong, like how bad it could be. But ⁓ my the next step to that was to if it were to start going wrong, how can we fix it quickly? Right. What do we have in place? That's how can we that's the ⁓ that's the pivot, that's the mitigation, that's the so that it that doesn't happen.

speaker-0: Right. Which is why when it comes to renovation projects or design projects, it's important that you go you think through the same scenario. Yeah. Because there is a level of planning, preparing, and preparing for not just the good, but what are the what are the other scenarios that could be happening? I mean, this is very heavy too when it comes to interior design and commercial spaces and Coding and all the regulations, you're you're evaluating spaces and designing based off of the code required. Where does the code come from? It comes from well, what could happen if we go over this threshold? What could the outcome be? And so you're it's the same thing. You're hudging the risk, you're mitigating, and you're making decisions. Yeah. Around that principle as well. This might be a little bit more challenging to

speaker-1: Based on all of

speaker-0: To give like a specific answer, but for our listeners' sake, I'm sure people are wondering, okay, yeah, we get it. But what is the right level of risk? Like how much is can I actually take, take on? Like, is there a threshold? Is there a marker? Is there something where people can understand I'm taking it too far or this uncomfortable feeling is okay to still move forward?

speaker-1: I don't know that there is a one hundred percent right answer in that. And I think that all boils down to a personal tolerance, your your situation, your life. What are you trying to build and what are you trying to accomplish? And what level of risk are you willing, willing to accept? I mean, let's ask you let's I guess try and rephrase this a little bit too of everybody, you know, so many people like to go to Vegas and go gamble. What's the one rule everybody I I don't know you've probably heard this a million times. If you're going to get do not gamble more than you're willing to lose. If you can't afford to lose it, don't risk it. Don't risk it. And everybody's tolerance and everybody's ability and that number for everybody is different.

speaker-0: So think like, can I survive the downside? How long is it going to take me to recover? Is there a margin baked into this? To your point, I don't think it is a one size fits all. But there is an intentional way you can evaluate. And in my opinion, knowledge is power. So the more you can educate yourself about the subject matter or whatever it is you're pursuing, and then have the framework of, okay, well, let's play these scenarios. This is all the upside opportunity, but what's the downside? And how am I evaluating each downside according to that upside? And and how risky is each one? And what are the primary downside factors? Or, you know, the secondary and really do a thoughtful analysis is going to help you put yourself in a better situation. And I think real estate making a purchasing a piece of real estate is a great example, real world example where you can say, okay. I see the property. This is what I'm willing to pay for it. You can put in the offer. Let's say you get the contract, and now you go into due due diligence and you begin to see other issues that create greater risk than you originally thought when you made the offer. And so now you can evaluate: okay, here's the opportunity, which is built into my existing offer. But now there's these different risk aspects that I have to consider. And what is the cost of each risk and how can I mitigate that risk. And so you would go back if need be in order to mitigate it. And you would come down on the original purchase price. And so it's that up and down, almost a scale type of visual where the more I've educated myself about it, the more I understand the risks that could be associated, the more I adjust to mitigate the risk accordingly. And you can use that same framework, you know, universally. whatever whatever you're doing, whether it's quitting your nine to five job to start your own business, same mindset you can evaluate, whether you're hiring a builder to build your dream home or buying your first, you know, investment property, like a rent and repeat mindset. It's like

speaker-1: Working out. It's it's building, yeah. It's building the muscle, it's building the the mental muscle, the understandings, the techniques so that you can do this again and you can get big you can get better, you can get stronger. And and the yes, the more you know, the more you can educate yourself with it, the better you can make those decisions. Not knowing every every little possible scenario because again, as we said, there is no guarantee to everyone. For that matter. I mean, but it doesn't mean you don't make any moves.

speaker-0: Or say anything. Or any. Yeah. You can't live a stagnant life and reach your goals. Yeah. And even from a design perspective, like this is why design development takes months upon months upon months before you ever start doing anything because you're going through really understanding what you're trying to accomplish and making decisions to reach the goal and mitigate the the risk associated. I feel like we really covered a lot today. We might we might have to encourage people to listen to this one again. Make sure you're digesting it. And to your point, it's like lifting weights. You're training your mind how to think. And this is exactly why we talk about removing the emotional charge that can be associated with purchasing or mainly purchasing, designing, things like that. This is exactly why. Cause you've got to give your yourself time to evaluate from a I would say a higher viewpoint.

speaker-1: higher viewpoint or a more a more grounded perspective. Really. Because you know, you you don't want to view it from the emotional high of everything. Yes, you want the 50,000 foot view to see everything, but you you have to make the decision from a I'm I see it and I'm I'm grounded. I'm calm, I'm ready, I'm clear headed, you know, all the things and you know you have to remove that that emotion that charges us. You know rational decisions oftentimes don't work

speaker-0: There you go. That's good. Yeah.

speaker-1: The ra the rash decision. You know, the quick Yeah. You know, the your rationale behind the the impulsive is not your that's not your greatest friend.

speaker-0: Rational decision. Well, I hope that you're feeling encouraged today to maybe step into the unknown, whatever that looks like for you, and have a fresh perspective of, you know, risk, what it's like for entrepreneurs, how we think, how we navigate risk, hedge it. And maybe it will encourage you to like step out and maybe pursue something you've always wanted to and ⁓ you know, dip your toes in the water. But if you are liking what you hear. Please make sure you are subscribed to our channel where we are rolling out content every week, sharing about entrepreneurship and design and investing, and of course, how to work them all together cohesively to make sure you are getting a return on whatever you're doing. So make sure you are also following us on our socials at Real Return on Design. And thanks for listening. We will see you next time.

speaker-1: See you all later.