BETA
This is a BETA experience. You may opt-out by clicking here

More From Forbes

Edit Story

Entrepreneurs Are 'Calculated' Risk Takers -- The Word That Can Be The Difference Between Failure And Success

Following
This article is more than 10 years old.

Credit: Wikipedia

I wish I had the thought that led to the headline, but I didn't.

"Entrepreneurs are not risk takers. They are calculated risk takers," is something that Leonard C. Green tells his students each semester at Babson College, which has been the number one school for teaching entrepreneurship for as long as they have been doing the rankings.

Green, 76,  is no ordinary professor.  He is a masterful deal maker who at one point own parts of three professional sports teams and a leading dog and cat food company and he continues to be an active investor in start ups to this day.

He is also an entrepreneur having created the Green Group, an accounting and management advisory firm.

So when he says entrepreneurs are calculated risk takers, he speaks from experience.

"The difference between risk takers and calculated risk takers is the difference between failure and success," he says.

Risk takers bet it all on one roll of the dice.  If they fail, they fail spectacularly and in such a way that they DON’T live to fight another day. They literally go out in a blaze of attempted glory.

But that is not what the best entrepreneurs do.

They figure out a way to reduce risk with every step they take. They follow the Act. Learn. Build. Repeat model that we have talk about throughout, a model that shows that not only are they not risk takers, they are actually risk adverse.

They only take small steps toward their goals, so they are not out much should they stumble, and before they take that small step, they figure out a way to minimize that tiny investment even further.

They ask “how can I take this step more cheaply (and/or by using someone else’s money); how can I do it faster (so I don’t have to invest as much time) and how can I do it better than I had initially planned?”

They are as far from risk takers as you can be.

Risk takers are NOT successful, as a rule. And the reason for that is simple says Green: They leave too much to chance.

###

Paul B. Brown is the co-author of Just Start published by Harvard Business Review Press.

Please note this blog appears every Sunday and Wednesday. 

Click on the "follow" link on the top of this post to receive each one the moment it goes live