Small Business

Why Entrepreneurs Aren’t Risk Lovers

Successful entrepreneurs need to have an outsized appetite for risk. They have to thrill to danger, relish the idea that they might lose it all with one roll of the dice.

Right?

Wrong, obviously, or we wouldn’t have written it that way. (Also, we probably would not have started a business.)

Many people have debunked those ideas, most recently Malcolm Gladwell, writing in the New Yorker. Using as examples Ted Turner and John Paulson, who famously made billions betting against the housing bubble, he argues that successful entrepreneurs are not braver than everyone else. Instead, they are very good at finding opportunities to minimize risk so they don’t have to be brave.

Take Paulson’s gamble against subprime mortgages, for example. He didn’t risk everything just because everyone was going in one direction and he liked the other. He and his employees bought huge databases showing the historic performance of millions of home loans around the country. They crunched and sifted and massaged the data, finally concluding that a small change in the market could result in a big mess. Which it did. And while everyone else was busy selling and bundling mortgages, he figured out ways to bet against them.

What’s the point? This is for all the people who are eying an entrepreneurial move–either because they got laid off or, well, just because–and are afraid they don’t have what it takes. You have a niche. You probably have insights into what’s undervalued and overvalued–insights that other people don’t have. So use that knowledge and experience to minimize your risk, and you won’t have to be brave to take a leap.

Tags: business, entrepreneurs, The Working World