Are Entrepreneurs Really More Comfortable with Risk?
October 1, 2012 Editor 0
Most people think entrepreneurs are willing to take on more risk than the average person. I’ve often wondered if that’s really true. After almost three decades of working with large corporations and entrepreneurs, I’ve developed a theory. Now, this theory hasn’t been vetted with controlled experiments and testing. It is based solely on experiential and intuitive data drawn from my life experiences. For instance, I have 12 years of working with entrepreneurs as an early-stage venture capitalist; 19 years working for a large corporation (Bell Labs & AT&T) and consulting to their multi-national, multi-billion dollar customers; 10 years of mentoring entrepreneurs; and created a carve-out start-up within AT&T.
Here’s my theory: most entrepreneurs aren’t more risk-o-philic than anyone else — they just define risk differently.
For some I’ve known, the risk of losing autonomy and control of one’s “destiny” was far riskier than losing “guaranteed” income and benefits. Working for someone else’s company, reporting to a boss, and living under rules they weren’t sure made sense were a lot riskier than creating their own business. The risk of not pursuing their passion, of not making a meaningful and significant impact on the world around them, feels much riskier than starting their own venture.
For them, risk isn’t as defined by losing tangibles (e.g., income, benefits, “stuff”) as it is by losing intangibles: fulfilling a passion that won’t let go, defining their own sense of purpose, sating their own curiosity, looking themselves in the mirror.
The difference here is between risking outputs and outcomes. Outputs (such as products, profits, etc) are necessary and good, but they have their most profound effect when driving significant, palpable outcomes — like reducing chronic pain, creating a prosthetic leg for an Olympic runner, or inventing an app that eliminates a time-consuming task. Most of the entrepreneurs I’ve worked with would gladly risk a few outputs for an outcome they believe in.
For many entrepreneurs, another critical risk worth taking is making themselves vulnerable in order achieve the outcomes they envision. As John Hagel has said, the risk of embarrassment, ridicule, skepticism, perhaps even humiliation is much less than the risk of not putting oneself out there to try. Anthony Tjan astutely summarized it this way: “The willingness to be vulnerable isn’t driven by the desire for exposure, but by the possibility of what that exposure might lead to — be it a meaningful role, the possibility to affect change, and, of course, greater financial gain.”
I’ve seen, heard, and felt so many entrepreneurs’ intense passion and purpose for the outcomes they want to create. It is what defines who they are and why they’re here. I know that risk-reward equation. While food, shelter, education, and health matter a lot, I need to see outcomes when I look my children, husband, friends and clients in the eye, not just outputs. If I don’t see a positive, wonderful impact on their lives and the lives they are responsible for and encounter, then my life was just a series of outputs — maybe even large ones — but not outcomes; and I will have failed tragically.
While this is a theory ripe for a more scientific validation, I’m pretty confident it will prove out, at least in some great part. The risk of not pursuing that passion, of not fulfilling that purpose, of having lived a life of stuff without also living a life of significance, is the greatest risk of all.
- Seven things you need to know to turn a start-up into a scale-up
- The Embedded Enterprise
- Why African Entrepreneurs Outperform Their Peers When the Playing Field Is Leveled
- No app for that: Why tech won’t solve global poverty as intended
- Move over, angel investors, crowdfunding is changing the rules of the game
- The Hidden Danger of Being Risk-Averse
Subscribe to our stories
- Entrepreneurial Alertness, Innovation Modes, And Business Models in Small- And Medium-Sized Enterprises December 30, 2021
- The Strategic Role of Design in Driving Digital Innovation June 10, 2021
- Correction to: Hybrid mosquitoes? Evidence from rural Tanzania on how local communities conceptualize and respond to modified mosquitoes as a tool for malaria control June 10, 2021
- BRIEF FOCUS: Optimal spacing for groundnuts in smallholder farming systems June 9, 2021
- COVID-19 pandemic: impacts on the achievements of Sustainable Development Goals in Africa June 9, 2021