Let me ask you a question asked to me this week: 'are you a
risk-taker?' Now it's tempting to say 'yes' to this without
thinking. Risk is cool and sexy. You only have to look at our
iconic heroes to see that. Fame is awarded to those daredevils who
take chances us mere mortals wouldn't even consider. They're the
high rollers who risk everything for the big wins, living every day
with a 'no risk, no reward' mentality.
The duller roles in society are typically played by those more
'risk averse' than 'risk-taker': the accountant, the lawyer, the
insurance clerk, the banker.
There's certainly not much street cred in saying, 'Actually, I'd
rather not risk it for a biscuit'. More pertinently, it's not what
you'd traditionally consider 'entrepreneurial'.
Anyone who starts their own business, by the very act, earns the
reputation as a risk-taker: often turning their back on a comfy
salary to pursue little more than a pipe dream, often against the
advice of their friends, family and bank managers.
Entrepreneurs, then, are often seen as embracing risk, something
that in most people's lives represents danger not opportunity.
However, this is where the assumption of the entrepreneur as a
risk-taker falls down: as the judgement is made through someone
else's eyes. The smart business owner will have a different
perception, not because they're crazed risk-takers, but because
they've invested time and energy converting what to everyone else
is a blind risk into a calculated risk.
See I don't think entrepreneurs are necessarily risk-takers in
the true daredevil sense at all - far from it. Sure, there are the
naive, novice start-ups who become so absorbed by their ideas they
lose all sense of judgement, but most entrepreneurs are actually
quite averse to pure risk. They don't take chances, they don't
gamble, they'd never 'bet the farm'.
Instead they seek opportunity and are prepared to take
calculated risks - and that's a huge difference. With a blind risk
you have no control over the probability of the outcome turning in
your favour. It's a 'close your eyes and see how it falls',
scenario.
With a calculated risk, you control as much of the outcome and
contributing factors as possible until you're convinced the odds
are firmly in your favour, the upside firmly outweighs the downside
and any negative outcome can be absorbed.
What does that mean in real terms? That smart entrepreneurs
don't start businesses, invest in new opportunities, switch
suppliers, launch new ranges or spend serious money on advertising
- all the kind of things outsiders might consider 'risky' decisions
- without researching, planning, testing and measuring the possible
outcomes until any risk is diminished significantly.
These are the skills and practices preached in business books,
sites such as Smarta and from accomplished entrepreneurs - indeed,
if you look at it, business people are surrounded by the message to
'reduce risk'.
It's no surprise then that most become more risk averse the more
experienced they become (and mistakes they make and learn from).
It's why our heavyweight established entrepreneurs are always
urging caution and rarely seem like risk-takers. You could argue
this is a negative, and indeed, becoming too hesitant and
risk-averse is surely one of the reasons many entrepreneurs' second
companies lack the verve of their first and are traditionally less
disruptive.
Even if you examine the most boundary-pushing entrepreneur of
all, Sir Richard Branson, his space race with Virgin Galactic is
countered by solid advance sales, huge brand awareness value and a
core portfolio safely secured in the rather less glamorous but more
lucrative financial services.
Entrepreneurs: risk-takers? Nah. Only the foolish.