“Pitiful is the person who is afraid of taking risks. Perhaps this person will never be disappointed or disillusioned…But when that person looks back…” Paulo Coelho
Are entrepreneurs insane risk takers? It depends on who you ask. To those who have never traveled down this road, entrepreneurs must seem like daring romantics or lunatics who get too close to the fire and don’t learn from a sudden burn. Others may conjure Elon Musk, Richard Branson, Jeff Bezos or the few others who are famous for their well-publicized risks that launching massive innovations or privatizing space exploration embody.
The Risk-O-Meter travels a long arc from average entrepreneur to space-race innovator. Risk taking is a unique disease. Where regular business people and entrepreneurs share a common stress – money – entrepreneurs have a lock on something deeper: risk. Risk is the constant and never-ending stress that is both the fuel and the fire that drives and fries.
If your career has taken you to work for others, versus starting your own business, you may still have taken risks. The difference is that many entrepreneurs seem to live for risk. This doesn’t mean taking crazy chances throwing caution to the wind. It’s not Vegas, where the random roll of the dice is unpredictable, with gamblers crossing fingers, closing eyes, and hoping for the best. With most entrepreneurs, there is normally a great deal of rationale and calculation that goes into taking a risk. And the more experience you have as an entrepreneur, the better your ability to gauge or minimize risks. Or so one hopes.
Risk taking behavior often starts at a young age, with kids “trying” things. Some risk takers grow up and mature up, working at minimizing risks and celebrating smaller challenges. Others thrive on adrenaline and grow into activity risk takers – think radical skiing, bungee jumping and such. And still others relish the challenge of surviving risky adventures and take that thrill into business.
Risk Training – Using a magazine article to build a high-performance boat
I guess that last one is what happened to me. Here’s an example of youthful creative risk taking (read: insanity). When I was 13, I pored over a Popular Mechanics magazine from the school library and found an article written, it seemed, just for me: Build Your Own Hydroplane. What could be better than traveling fast, without rules or speed limits! I was hooked on the idea of commanding a full-on speedboat. I convinced my mother that it all made perfect sense and got her to drive me to the local lumber yard.
I put in a frenzied number of weeks building this thing from the two wrinkled and torn magazine pages. Fast forward to my maiden voyage: it was late afternoon on a blustery fall day. With my trusty Evinrude 4-horsepower engine mounted on the transom, I motored my way out of the harbor and into a turbulent Long Island Sound (did I mention I was on saltwater? Not an ideal environment for a six-inch tall boat hull).
10 minutes in, I was swamped and sitting in a pool of cold grey water. With no one around and far from shore, I had to weigh my chances: pull the drain plug in the stern, power along, and hope the physics of a drain plug would work as designed, or drift helplessly and hope for a passing fisherman before sinking. Thankfully, I chose to help myself. Physics prevailed, the seawater slowly drained out and I made it back to port, soaked, scared and alive.
I use this example, not because I was doing a lot of risk analysis at the age of 13, but to demonstrate how pure risk taking without calculation can sink your ship. Over time, with each new project, and the associated level of zaniness; I began to develop an internal risk calculator.
Risky Business: All in a day’s work – the author experiments with speed skiing equipment
As a serial entrepreneur, I have developed a self-governor (beside my spouse) that calculates how much I am willing to risk in terms of financial, emotional, mental, reputational, and physical exposure. At 20, I was willing to bet my rent money; at 50, not as much. With age also came the issue of more deliberate calculation of risk, and the need to ensure my spouse was considered, at least a bit, as part of that calculation, because mortgaging the house can tax even the most solid relationship (read: how to avoid divorce).
Risk at Work – Committing to shelves of inventory based on other people’s “projections.”
For any entrepreneur who doesn’t bury his or her head in the sand, the hard-knock school of trial and error is an education that can last a lifetime. Moderating risk counters the carefree bravery that others may believe is the key characteristic of entrepreneurs. Even if a project fails, it’s not a complete failure, provided the entrepreneur analyzes the people and process, and feeds these lessons into the risk calculator for the next one. True enough, it can convince some that they are not cut out for this line of work and lifestyle. It’s a fine line that separates calculated risk and insanity, but you will never find an entrepreneur who is totally risk adverse as fear and indecision will strangle the dream.
The key to risk taking is to truly run your calculations beforehand, check your gut, and be fully honest with yourself. There will always be risks you cannot foresee and some that are unavoidable. Calculation helps to mitigate risk and regulate your emotions. Commitment and intelligent analysis are critical, and while this sounds painfully obvious, far too many would-be entrepreneurs dive in, fueled solely by their own eagerness. Worse, many are fueled by family and friends telling them their idea is “genius,” all without any expertise or market research. Consider entrepreneurship to be like childbirth: once you get excited enough to pull the trigger; it’s hard to go half-way.