image:cleantechnica.com
culled from:businessweek.com
As a follow-up on our recent discussions of how entrepreneurs think about risk, I want to flag this book excerpt on Tim Ferriss’s blog.
In a new book called Leap, author Rick Smith recounts how Bill Gates started Microsoft with a combination of experience, calculation, and luck. Smith argues that the approach is the opposite of big risk-taking: entrepreneurs like Gates spend years validating an opportunity and minimizing their risk.
What’s more, Gates had validation that both he and Allen were highly competent with this new technology, and he could see that the topside potential was huge. …
Far from being one of the world’s great risk takers, Bill Gates might more accurately be thought of as one of the world’s greatest risk mitigators. And in that, he is not alone. The simple fact is that everyone is afraid of risk at some level, including everyone I interviewed for this book. …
You don’t have to be fearless to make dramatic changes in your life. Transformative change isn’t propelled by raw courage. It’s “sparked” by a series of events that build exposure and experience, both of which help to create asymmetric risk. Through sparking, the upside opportunity is confirmed while downside risk is mitigated. Ultimately, the leap—when it comes—is not one of faith but of experience, even of comfort, just as it was for Gates.
It sounds simple and obvious to minimize the downside risk while maximizing the opportunity for gain. But how many entrepreneurs actually do that? That might mean keeping your day job for years while working on your business idea. It might mean abandoning a dozen more appealing opportunities because you can’t validate them. That idea of asymmetric risk is key. I think most entrepreneurs who successfully build long-term ventures keep that as a guiding principle.
Interesting, John Tozzi! But, why can’t we talk about something really important and interesting like the great and undisclosed RISK of franchising a small business for the prospective buyers of retail franchises and business opportunities? Why can’t we talk about “asymetrical Information” concerning risk?
Franchisors take up a lot of space in “The Entrepreneur” who rate them high on their own criteria that doesn’t disclose the risk to the franchise b uyers.
Franchising always grows in recessions because of the lobbying of the big franchisors and the IFA who then increase their power and position in the law.
Obviously, the franchisors, through the International Franchise Association (IFA)who are educating and lobbying the Congress this very day, greatly reduce THEIR risk in growing their chain operations because the risk of building the physical units that wear the brand names are passed off to the franchisees who have NO idea of the risk they are taking.
IFA-educated officials like Olympia Snow are working against President Obama’s public health plan in the Congress It was Olympoia Snow’s Committee, I believe, who made veterans and their family members targets of exploitive franchisors when she pushed the Patriot Express Loan Initiative of the SBA through the Congress and the 90% guaranteed loans that produce product for the banks and lenders.
I’m sure the Congress, both Democrats and Republicans, understand the flaw in the FTC Rule that produces victims in franchising, but are unwilling to fix the flaw because the victims are generally silenced in failure and in arbitration and the courts. No doubt that the Congress Works for Big Business, as pointed out by Independents like Ralph Nader.
How can Business Week talk about RISK without talking about the undisclosed risk in buying a retail franchise? Why doesn’t Business Week do an overview on Risk and Health Insurance in the Entrepreneurial Community, and expose how retail franchising and BIG Franchisors are subsidized under the guise of helping small business people?
Entrepreneurship is not about taking risks – it always has been about identifying and avoiding or mitigating the risks.
It is the media and movies that have created this romantic idea of a risk taking entrepreneur.
I agree! It is the media, like Entrepreneur Magazine, that has mislead prospective franchisees into believing that they, also, are entrepreneurs like their franchisors.
The ratings that Entrepreneur gives to “dogs” and “pigs” of franchises who also appear on the SBA Franchise Registry does mislead that portion of the public who buy franchises for security and a job when we are in recession.
Unfortunately, even those who should know better, like the AARP, have inadvertently, I’m sure, pushed franchising with articles that don’t truly disclose the risk of franchising to their readers.
