As I watched the “diving horse” show at an amusement park in Lake George, NY, I wondered whether that poor horse would actually decide to plunge down into the swimming pool below. Would it jump or not from this contrived diving board? Despite some hesitation, in the end the horse was pretty brazen – swoosh – and it came out from the pool like nothing had happened. Unlike most of us, the horse discovered the unknown.
The truth is that the world is divided into two major groups – those who play it safe, and others who love risk. I don’t know how it is for you, but it seems to me that the first group prevails. And frankly, you can see it across the board, non-profits, businesses and government agencies – people are too scared to jump into the unknown.
So why are people so cautious? Is it good or bad to be risk averse? What are the reasons behind this type of behavior? Tory Higgins, Columbia University professor, invested over 20 years in resolving this mystery. Higgins believes that people in the risk averse category “tend to see their goals as opportunities to maintain the status quo and keep things running smoothly.” Risk averse people, according to Higgins, maintain “a prevention focus” with no tolerance for making mistakes or taking chances. The opposite group, risk takers, are “promotion-focused”, and see their goals as opportunities. Still, is everything so black and white?
Heidi Grant Holverson, the author of an HBR article Hidden Danger of Being Risk Averse, points out that it is not so simple as we may think. According to another research study by Columbia University focused on investment decisions made under crisis conditions, when times get tough, risk averse people tend to make “edgy” decisions on the same rate with risk takers on one condition – this option must be the only way out to maintain their status quo.
In fact, even entrepreneurs, who are glorified in various popular articles throughout the web as ultimate risk takers, in reality are not so jumpy. A brilliant Forbes article, Are You Risk Averse? You Could Be The Perfect Entrepreneur, quotes Steven Berglas that successful serial entrepreneurs don’t like risk for the sake of risk. According to Berglas’ research, serial entrepreneurs always choose a measured approach amid uncertainty. They simply follow the classic risk management mantra:
“If you’re going to play in a game with uncertain outcomes, don’t pay/bet more than what you can expect as a return, and don’t pay/bet more than you can afford to lose.”
This brings us to the two most important questions that every risk taker needs to ask before jumping into that pool:
- Can I afford to lose financial stability, time, “face” (professional and personal reputation) and opportunity cost?
- Am I willing to pay this price?
If you want to follow advice from serial entrepreneurs and/or successful intrapreneurs, you may want to think seriously about these options. Breaking the Rules
But what do you do if you are someone like the Wolf of Wall Street? What if you are willing to take all these risks and break all the rules in one gulp?
“Like it or not, there are some “rules” to breaking the rules,” advises Gwen Moran in her The Rules to Breaking the Rules article.
She defines 4 simple criteria that help those Wolves prepare for this act of courage:
- You know enough to make a good break
- You’ve calculated the risk
- The break aligns with your values (nothing unlawful or unethical!)
- You are prepared to face the consequences
Who would be a perfect example for you? I see Steve Jobs as the first contender for “smartly breaking the rules.” Jobs had it all during his epic rise to his legendary status. He had chosen to follow an unbeaten path, and created a whole new industry by thoroughly calculating the risks. He openly faced the consequences when he was fired by Apple. But he went on because this path fully aligned with his values. “It turned out that getting fired from Apple was the best thing that could have ever happened to me,” he told in his famous Stanford University commencement speech.“Sometimes life hits you in the head with a brick,” he said. “Don’t lose faith.” Was it worth the risk? I bet it was.
Another powerful example is Rakuten’s CEO, Hiroshi Mikitani, a multitalented Japanese entrepreneur who created Rakuten, an Amazon e-commerce rival. Mikitani is never shy of breaking barriers. He began with dropping a lucrative career in the financial field. Instead, he jumped into the unknown, and launched a whole revolution at home, from changing the culture of the company by imposing the English language across the organization, to transforming his Japanese business into a global empire.
In his bestselling book, Marketplace 3.0, Mikitani shared key principles of Rakuten’s success. Mikitani’s drive to constant experimentation, validation of new innovative ideas and incremental improvement paved the way for Rakuten’s global leap. Mikitani says: “If we are to be a company that constantly improves, we must have a spirit of experimentation.” It doesn’t mean that all ideas will be perfect either. They won’t. “If this happens we have not failed. We can be secure in our knowledge that we fully explored the possibility.”
And there are hundreds of others who made it to fame by breaking the rules of their industries. The point is that whether you are risk averse or not, there are certain rules of engagement that even the riskiest risk-taker may want to explore before diving into the pool of the unknown.
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