An Entrepreneur’s Job is to take Risk – Right? Perhaps NOT!

We have all read about the risks in entrepreneurship, heard about them, seen people take them (or at least closely observed a dear friend who took several risks in his entrepreneurial journey). We have all seen the elusive successes and also heard the stories of crashed-and-burned. For those of us who harbour entrepreneurial ambitions, what does this mean? That Zero Moment of Truth (Z.M.O.T.) when one has to take a call of leaving his job, breaking his bank or making a crucial decision on whether to invest money in product or marketing – is overwhelming to many. This essay addresses the concept of risk in this context.

Often the job of an entrepreneur is described to be that of risk-seeking. After all, in the game of disruption and displacement of an existing market or the creation of a new market/segment, there is bound to be some risk. There are many articles that provide advice on the risks which entrepreneurs need to take – get used to life without a paycheck, sacrifice personal time, risk personal savings, etc. And then there are family and friends guiding one to either take the jump or be cautious enough to save ample capital and think of the downsides before going down the route. What is the balanced view between the sail and stay ashore recommendations? The real answer is none. A generalised view doesn’t fit the situation of an average individual wanting to take the entrepreneurial route; it does not provide for the context of the individual taking the call. Risk appetite is a personal decision, and it’s much like the running stamina (or love/hate for running) for any individual.

ALSO READ: How to live life without a paycheck, and should you?

In this essay, we bring the views both in and against the notion of risk by quoting popular reads.

The ‘Ayes’ point out various notions including:

  1. The future what-if question: What if I had tried this when I was XX years old?
  2. It’s tough to disrupt the status quo without taking risks; lack of risk appetite is what’s stopping the incumbent from innovation.
  3. You learn by taking risks.
  4. By being ready to seize the opportunity, you will likely be a trailblazer.

ALSO READ: The various stages of an early entrepreneur’s journey. Where to focus?

And the ‘Nays’,

  1. Protect your downside than thinking of the upside (same as the bird-in-hand logic).
  2. Entrepreneurship is a sustained journey, and you would lose patience along the way, so it’s not worth starting if you are going to fade 6-12 months later.
  3. It’s a toll not just on you but also on your family and loved ones.
  4. Displacing heavy giants is not easy and involves a great idea, execution, timing and in some cases, luck. Are you ready for taking the chance of all of these going right for you together?

So when one goes through the opinions of the ayes and nays, he is left struggling for the right choice. After all, in some sense, it’s the appeal of the mind vs the heart. So how does one really make a choice? We bring reference to an alternate perspective provided by Adam Grant in his book Originals: How Non-Conformists Move the World. The book provides many examples and perspectives, but two of them particularly stand out in reference to the context of this essay.

First, Adam Grant talks about his decision to not invest in a startup where the founders were still in school and looking for internships/jobs to cut risk in case the startup didn’t take off. In Adam’s thinking, they didn’t have enough skin in the game or risk appetite for him to back them up using his personal capital. The startup went to become Warby Parker – an American online retailer of prescription glasses and sunglasses valued above a billion dollars and has raised $300 MM to date. Adam talks a lot about Warby Parker in his book to explain how the founders cut risk at various stages including the risk of carrying inventory.

Second, Adam talks about risk in internal enterprises. This is highly relevant as many readers of this essay may be seeking intrapreneurial ambitions (or want to help reinvent things where they work). In this example, he talks about Carmen Medina at CIA and how her plans to reinvent collaboration around intelligence gathering were considered too risky. She failed only to come back many years later and revive the project to be a big success.

The interesting view that Adam provides is that the role of an entrepreneur is perhaps not to not take risks but instead avoid it – systematically. If one chooses to ascribe to this view, then the key is to identify that risk.

If you wish to become a successful entrepreneur, have an idea in mind or are looking for one, it would be a good idea to learn from a professional course meant to help budding or early-stage entrepreneurs. For more information about the London Business School Entrepreneurial Edge programme, visit us.

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