Question

In: Accounting

Discuss the Risk faced by you in the life and process of dealing with it.

Discuss the Risk faced by you in the life and process of dealing with it.

Solutions

Expert Solution

You should really look into the work done at Babson College where they analyzed actual entrepreneurs and risk taking. Most people are terrible at assessing risks. They get into denial, magical thinking, deer in the headlight paralysis -- a thousand pitfalls.

Part of this comes from taking money as "survival tickets." I know I won't die if I don't draw salary for a while. My life is set up that way. No mortgage, very little debt, limited overhead.

To me, my lifestyle is far less risky than friends with 2-3 car loans, a couple kids in college, a McMansion, and if either stops working a beltway job they're toast. Yet all they do is batch how they are trapped and ask me for another set of stories from my scary but somehow enviable unfettered "risky" life.

Stable money is obviously not my top motivation. Babson found the joy of innovation and seeing a plan to fruition, the benefit to community and society, and meaning came first -- money was never the first purpose for the people in the Babson studies. Process, helping/altruistic ends, creativity, a zillion other purposes.

Do what you love, and yes, often enough, the money will follow -- if you manage risks. ;)

What the Babson research found was that most entrepreneurs, certainly serial entrepreneurs such as myself, are actually more risk averse in some ways than the general population. We will spend an inordinate amount of time modeling outcomes and scenarios, like possible openings to a wargame, and as the fog of war lifts, we are willing to take the stress of making clear headed adjustments on the fly to avoid risks for best outcomes.

But if you are, really, an exceptional leader, then that inflection point on that path will not seem obvious, even sane, to the less visionary in your cohort. So it will seem as though your actions are, at the time, audacious, even irrational. There is often no time to "show the work," and many entrepreneurs can't articulate their own process.

If it were easy, everyone would do it.

And, the Babson project used this research to identify successful prospects for investment, for example, by this personality type.

Entrepreneurs who were, in fact, just risk takers, were poor investments -- consistently. So separating sheep from goats is vital for funders, and validating for those of us recognized as true to type


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