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Leading a business involves risk. For some of us, just getting out of bed each day seems like a risk. For others, they can’t get enough of it. Being a risk taker is on the high end of the scale for entrepreneurs and visionaries.

 

 

Our business culture is full of stories about famous risk takers. Yet the way we each look at risk says a lot about where we are as entrepreneurs, business people, and leaders.

I come from a banking background. The basic principles of banking involve risk and reward. As your banker, I will lend you X dollars if you agree to pay me Y interest. The interest rate is a reflection of the risk I perceive to be present in your deal. I can agree to make you a mortgage loan and give you 30 years to pay it back. Residential mortgages in most markets are usually safe risks, so I can keep the rate relatively low, like 3.5%.

However, if you ask me to fund some short-term working capital so your company can go buy materials to manufacture a strange new product, like rockets to Mars (see Elon Musk story below), the rate might be double digits. That is if I agree to make the loan at all. The perceived risk is too high.

A banker’s idea of risk is not the only view though.

Let’s examine risk and embrace it!

Albert Einstein’s neighbors on Saranac Lake didn’t remember him for the Theory of Relativity, but for all the times they needed to save him from his seemingly lousy sailing skills.

Einstein
Einstein loved sailing and taking risks. He often sailed into storms when scientists and friends came to visit, although he didn’t know how to swim, and in 1944, his boat hit a rock and capsized causing him to become trapped under his sail. Yet he never panicked, these were his happiest times, where he took notes and wrote in his diary. His risk-taking helped him stay curious and innovative, and he may have even written the Theory of Relativity on a sailboat!

What’s the definition of Risk?

Risk involves the potential of losing something valuable, a high probability actually. That something can be emotional (such as a relationship), physical (such as your health), or financial (such as your job).

The Oxford Dictionary cites 1655 as the earliest use of the word “risk” in English, derived from the French “risque,” which means danger. But consider other derivatives – the Italian verb “risicare,” means “to dare,” while the dual Chinese characters for “risk” are “danger” paired with “opportunity” – and you get a different glimpse of what risk-taking entails.

Every human innovation has come from risk

From hungry prehistoric hunters chasing down large mammals across the ice to blasting into space with reusable rockets and artificial intelligence — embracing risk has driven humans to remarkable achievements.

Risk has helped “define what it means to be a human being,” according to Peter L. Bernstein, in his 1996 book, Against the Gods: The Remarkable Story of Risk. And it has propelled science, communications, finance, innovation, speed, and power throughout history.

Business Innovators and Risk-Takers

Elon Musk is the ultimate serial entrepreneur and risk taker

Elon-Musk

Elon Musk is one of the great visionaries of our time. By taking risk after risk, he has helped transform the world. After attending Stanford for just two days in 1995, he deferred his enrollment to try his hand a creating an internet company with his brother. He never went back to Stanford.

In 1999, Musk and his brother sold their company, Zip2, to Compaq for $307 million cash and $34 million in stock options. But he was still disappointed that the company didn’t make a significant impact on the world, which was his broader goal. With barely any downtime, he decided to take on the financial industry, where transactions like mailing checks were slow and archaic.

He founded x.com so consumers could make electronic payments. After merging with his competitor, they were able to compete against eBay. The new company, PayPal, transformed the financial industry, and when eBay acquired PayPal for $1.5 billion, Musk was the largest shareholder and walked away with $180 million.

As a child Musk loved reading science fiction but was disappointed that NASA had no plans for a mission to Mars. And so SpaceX was born. Musk also wanted to end humanity’s addiction to fossil fuels, so he developed sustainable energy with SolarCity. And if that wasn’t enough, he founded Tesla to create an electric car that people coveted, that wouldn’t be a compromise.

But after the 2008 recession and his divorce, all his companies went into freefall. Musk was at his lowest point. He took a leap of faith and invested all his reserve capital from the sale of Paypal, his last $35 million, into Tesla.

It paid off! Tesla is now valued at more than $61 billion, SpaceX won a 1.6 billion contract with NASA, and SolarCity is America’s largest provider of solar energy. And Musk is not playing it safe. He’s now taking on city transit with his latest project, the Hyperloop.

Katherine Graham was the first female Fortune 500 CEO

katherine-graham

When her husband committed suicide in 1963, Katherine Graham took over as publisher of the Washington Post. Her father first purchased the failing paper at auction in 1939. By 1972, her success at the now-groundbreaking paper – where she was often the only woman in the room – had made her the first female Fortune 500 CEO, and later won her a Pulitzer Prize when she published her memoirs in 1998.

Even with her own doubts about running the paper, and with no female role models to draw on, Graham forged a brave, risk-embracing path at the Post, starting with the publication, against the advice of her lawyers, of the Pentagon Papers in 1971, after the New York Times was placed under a federal court injunction.

Frightened and tense, I took a big gulp and said, ‘Go ahead, go ahead, go ahead. Let’s go. Let’s Publish.

This was a key turning point for the Washington Post, which, under Graham’s helm, published Bob Woodward and Carl Bernstein’s startling investigative front page articles about the Watergate conspiracy. The investigation led directly to President Nixon’s resignation under threat of impeachment in 1974 – and was immortalized in the film, All The President’s Men.

What does this mean for your business?

Human innovation has always been derived from risk, so why should we cease or even hesitate in our drive to build our businesses? Experimentation, innovation, and learning new things are all tied to curiosity and the risk of failure…or success.

The biggest risk is not taking a risk.

A risk is often equated with action, and the more risks – and action – we take, the more we learn and win. Taking risks keeps us fresh, vibrant, and innovative. It may cause stress and anxiety, but scientists are discovering that stress triggers us to be more focused, more empathetic, and better at adapting to adversity. It’s part of our quest for survival.

We are afraid of failure. Yet in science, in art, in sport, in business, in life — risk and failure elevate us to the next level. We don’t progress doing the same thing. Build a strong foundation, assess every factor you can, but take that chance. Embrace the risk.

What risk is holding you back today? Is your appetite for risk a healthy one?

Written in collaboration with the fine experts at Embroker

Originally posted on DougThorpe.com

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