The Time to Take a Risk


There he is – at the high stakes poker table. The four, six and eight of hearts are face up on the baize. He’s all in. Surely he can’t have the five and seven? Can he? You’ll have to pay to find out…

There he is again. York races. The horses flash past the post. Was that the slightest of smiles? That’s between him and his bookmaker…

Seven o’clock the next morning. As always, the first one into the office. A bank of computer screens. Stock market prices, foreign currency exchange – and the production figures from his factories; the sales figures from his shops. He finishes his black coffee, takes his tablets and settles into another high-risk, high-pressure day. Another typical day for an entrepreneur…

That’s the popular perception of the entrepreneur – someone who loves risk, who needs the adrenalin rush from risk, who even goes out of his way to create risk where none exists.

That’s the popular perception – and in my experience it couldn’t be more wrong.

How can I possibly say that? After all, I run my own business. Most people reading this blog run their own business – or at least have a significant portion of their future prosperity tied up in the success of the business they’re managing.

We’ve all taken risks. We’ve given up the security of the corporate world for the doubtful joy of working until ten o’clock at night and wondering why the person you thought you’d developed a relationship with hasn’t paid his invoice. Maybe some of us have had to tell our families that Christmas won’t be quite so spectacular this year – and spend January explaining to the building society that they’ll need to be patient…

There’s nothing more stressful than running your own business. You put your wealth, your health and your psychological well-being at risk.

But that doesn’t mean that entrepreneurs enjoy risk – and it certainly doesn’t mean that they go out of their way to create risk.

In my experience, the vast majority of entrepreneurs I work with would class themselves as being ‘risk averse.’ And as I wrote last week, that’s one of the key strengths of The Alternative Board – the collective wisdom round a Board table goes a long way to reducing risk, to making sure that you’re aware of all the possible downsides before you press ‘go.’

But there’s something else I notice as the discussion on risk goes round the table. Entrepreneurs define risk differently to other people. The entrepreneurs I work with see a different type of risk. Let me explain by taking you back to Newport Pagnell service station…

I’d finished another identikit motorway breakfast in another identikit service station – and I’d decided to leave the security of the corporate world and start my own business. Doing what? I didn’t know at that time. But come hell or high water, I was going to be my own boss. That meant saying goodbye to security, to my company pension, company car and all the other trappings of being a few rungs up the executive ladder.

And conventional wisdom dictates that I was taking a huge risk in giving all that up.

But if I didn’t start my own business there were far greater risks. Risks I simply couldn’t accept any longer.

The risk that I’d never know if I could have succeeded on my own.

The risk that I’d never really fulfil my potential.

And above all, the risk that someone else could dictate my schedule – and that I might miss seeing my boys grow up.

Almost everyone reading this blog will be able to identify with that. It isn’t conventional risk that the entrepreneur fears. ‘No money? Fine. I had no money when I started. I’ll start again.’ It’s the risk that can’t be quantified. It’s the risk of not fulfilling your potential, the risk of missing your children growing up and, above all, the risk of never knowing if you could have done it or not…

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2 comments

  1. Dick Jennings · July 11, 2014

    Possibly the most perceptive piece you’ve ever written Ed. A really interesting insight.

  2. simonjhudson · July 11, 2014

    I couldn’t agree more.
    There is more to it of course. Do we move AWAY from a high risk situation or TOWARDS a low risk one, for example.
    In my case, to remain doing what I was meant that I had a high risk of becoming deeply unhappy, compromising both my ethics and self belief and ultimately moving out of my then role at a time not of my choosing; the uncertain future of entrepreneurship was the smaller risk, coupled with the self belief (or naiveté if you prefer) that I could make a go of it.

    The risk equation is more sophisticated as well:
    Risk = likelihood x consequence

    As entrepreneurs, we gauge the changes of something happening (coupled with our belief in or ability to influence this chance) strongly coupled with the magnitude of the positive or negative outcome.
    High likelihood + High +ve outcome = do it
    High likelihood + High -ve outcome = Avoid
    High likelihood + low +ve outcome = do it if you have nothing better to do
    High likelihood + High -ve outcome = don’t sweat it
    Low likelihood + Low -ve outcome = Don’t sweat it
    Low likelihood + Low +ve outcome = Don’t sweat it
    Low likelihood + High +ve outcome = Work it to see if you can improve the odds
    Low likelihood + High -ve outcome = Don’t sweat it, but have a backup plan

    Simple. Not that we ever write that lot down, that’s what intuition, experience and chutzpah are for.

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