Prepare for the Unpredictable: The Power of Safety Margins

The most important part of planning is preparing for the moment when things don’t go according to plan.

Benjamin Graham is famous for introducing the concept of the “margin of safety.”
He wrote about it extensively, with mathematical detail — but his most famous explanation came in a single interview, when he said:

“The purpose of the margin of safety is to make forecasts unnecessary.”

There is enormous power hidden inside that one simple sentence.

The margin of safety — or, put differently, “room for error” — is the only effective way to move safely in a world driven by randomness.

Accurately predicting the future is incredibly difficult.
It is nearly impossible to know what the average stock market return will be over the next ten years, or the exact date someone will retire.
But these are ultimately the same type of uncertainty — and the best we can do is think in probabilities.

Graham’s idea sends a simple message:
The world is not black-and-white.
The future is not either fully predictable or fully unpredictable.
The “grey zone” — a mindset where many outcomes are acceptable — is the smart way to move forward.

Why do we fail to leave room for error?

Two main reasons:

1. The illusion that we must know the future.
   Admitting uncertainty makes people uncomfortable.

2. The belief that if you don’t know the future exactly, you can’t make good decisions.

And so the concept of “room for error” is often misunderstood.
People think it is a fence built by overly cautious investors who are afraid of risk.

But the truth is the opposite:

• Room for error allows you to survive a wide range of possible outcomes — and that survival gives you enough time to benefit from rare but highly rewarding events.

Charlie Munger said:

“The best way to get happiness is to lower your expectations.”

The dangerous cousin of this idea

Its close relative is what Taleb calls “the optimist risk-taking bias” — or the “Russian Roulette should work statistically” syndrome:

Clinging to positive odds even when the downside is completely unacceptable.

Nassim Taleb puts it perfectly:

“You can love risk, while absolutely hating ruin.”

And that is exactly how it should be.

So: Take risks — but never take a risk that can destroy you.

Example:

You may have a 95% chance of making money.
But if the remaining 5% could wipe you out, that 95% is worth nothing.

Taleb calls this the barbell strategy:

One side: maximum safety
The other: small, controlled risk
Anything in the middle leads to fragility.

The most dangerous risk: the one you never imagined

Germany had the most advanced tanks in World War II.
Yet by late 1942, when they desperately needed them on the front line, fewer than 20 out of 104 tanks actually worked.

Why?

While sitting idle behind the lines, rats had built nests inside the tanks and eaten the insulation off the electrical wiring.

The tanks were stuck and useless — and the Germans were beaten by rats.

What tank designer thinks: “We must protect this machine from rats”?

No smart engineer does. No historian of tank design teaches it.

But that’s how life works — the greatest damage usually comes from things we never even considered.

 

The same is true in business 

Ask a startup founder about the biggest risks they face, and they’ll list obvious things.
But beyond predictable problems, these things also happen:

• Water pipes burst, flood the office, destroy all equipment

• The CEO’s email gets hacked during a fundraising call

• A customer complains about someone bringing a dog into the store and calls the health department — the store gets shut down

• A co-founder has a nervous breakdown

None of these were forecast - but all of them are real.

You cannot prepare for what you cannot predict.

If there is any protection against these risks, it is this: Avoid a single point of failure.

Build your life or business in a way that one broken component cannot collapse the entire system.

Conclusion

The biggest financial single point of failure is living paycheck-to-paycheck, with no savings for unknown future expenses.

We must save not only for the risks we understand, but for the risks we cannot even imagine.

That is why: The most important part of every plan is what you will do when the plan stops working.

 

Imam Ali (a) said:

“I came to know God by the breaking of determinations, the undoing of plans, and the collapse of intentions.”
Nehjul-Balagha, Saying 250

Meaning:

“When my plans failed, I understood that I am not the one in control — God is.”

If this life is a game, do not forget the Real world — and the Lord who created and governs all things — while you are busy playing.