Risky Business

Simon Hopes edited this page Sep 5, 2017 · 2 revisions

Github.com is home to some of the most successful entrepreneurs in business, from Airbnb to PayPal, Facebook to Google, and we’ve all heard stories about the huge risks that their famous founders took to get started. Reading all these tall tales, it’s easy to believe that risk-taking is the key to success, but in reality, this is far from the truth. As Leonard Green, a lecturer at Babson College, the top U.S. school for entrepreneurs, explains: “Entrepreneurs are not risk-takers. They are calculated risk-takers.”

It’s a subtle but important distinction; it’s the difference between a craps player, who risks everything on a random throw of the dice, and the seasoned poker player, who takes calculated risks based on skill and experience. “The difference between risk-takers and calculated risk-takers,” says Green, “is the difference between success and failure”.

We all love to hear the stories of brave tech pioneers who risked everything by leaving college or giving up their career in pursuit of their dreams and visions. But when you dig a little deeper, you find that in nearly all cases, our heroes were rather more cautious than their legend would have us believe.

Steve Wozniak may have invented the first Apple computer, but he kept his job at Hewlett Packard for a full year afterward. Sergey Brin and Larry Page went even further, keeping their day jobs for two years after coming up with Google. Even Bill Gates didn’t “drop out of college” to start Microsoft, as most people believe. What he actually did was take a leave of absence. Like any good poker player, he kept some chips back so that even if he lost the hand, he was still in the game.

In fact, studies show that entrepreneurs who go “all in” when they think they have a winning hand are 33% more likely to fail than those who proceed with a little more caution and keep their day job.

So, does that mean we should simply fold our hand and not play? Absolutely not. Mark Zuckerberg once said that “the only strategy that is guaranteed to fail is not taking risks.” While your hand may not always win, if you fold, you will never walk away with the prize pot. The only thing you’ll be left with then, is regret, as Steve Bezos says about playing his hand with Amazon: “I knew that when I was 80, I was not going to regret having tried this…I knew that if I failed, I wouldn’t regret that. I knew the one thing I might regret is not ever having tried. And I knew that would haunt me every day.”

We all take risks every day, from crossing the road to deciding whether to take a coat on a cloudy day. Our brains are constantly playing poker with the world around us, assessing the odds of different outcomes and the potential rewards of our actions. The important thing, however, is to understand the game and know the strength of your hand. As an entrepreneur and innovator, there will inevitably be many things that you simply cannot know, just like you cannot know what cards your opponents hold at the poker table. However, calculated risk-taking is all about reducing the risks as much as possible using the information that you do have. Just ask one of Github’s other famous clients: NASA.

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Even if you haven’t got any cards worth playing, you can always bluff until you do, as Bill Gates proved in his early years. He famously got a meeting with the president of MITS by claiming to have some exciting new software but didn’t actually write the program until the meeting was confirmed.

Not all your risks will pay off, even the carefully calculated ones, but you can’t learn from your mistakes if you never allow yourself to make any. Risk is a cost of opportunity, just as a raise is the cost of staying in the poker game, and you will never win if you don’t play. But by calculating those risks carefully, you’ll find you hold a winning hand far more often.

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