STAGE 3Risk Management

One of the variables that differentiate entrepreneurs from other businesspeople, indeed from most other humans, is their appetite for risk. It is often perceived to be unhealthy, even gluttonous. More often than not, a successful entrepreneur bets heavily—often against the odds—on one business: his own. Most people are risk averse; they’d rather be safe than sorry. Entrepreneurs seem to seek out risk.

In his recent book, Originals, Adam Grant suggests entrepreneurs are actually more risk averse than others.1 It clearly can’t be that entrepreneurs are more risk averse and more risk seeking. I think this discrepancy reflects the different ways risk can be measured. I would suggest that by most conventional measures, the risks taken by successful entrepreneurs are great risks others would avoid. But in reality, because of the rare traits they bring to the table, many successful entrepreneurs analyze those risks differently and may envision unique ways to mitigate them. Other people simply may not have the creativity or intelligence to see these solutions. In that sense, successful entrepreneurs can be quite conservative because they do not take on risks that they are not confident they can effectively manage.

The act of walking away from a job or even a successful corporate career to start a business, often on savings or a loan or a credit card, is not for everybody. But as much as they feed on risk, the best entrepreneurs are not crazy risk-takers. They ...

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