“If you’re not willing to risk the unusual, you have to settle for the ordinary.”
Mark Zuckerberg once told a group of young entrepreneurs, at a school in Palo Alto, “It is risky not to take chances. In a world that is changing quickly, the only strategy that is guaranteed to fail, is not taking risks.” The biggest risk that an entrepreneur can take, in today’s time, is to play it safe.
What is risk taking, really?
Risk taking can be defined as the act of doing something or making a decision that is dangerous, in order to achieve a goal. To a certain extent this is almost synonymous to the meaning of being an entrepreneur, which is ‘to risk capital, in hopes of a profit.’
An Inspiring Example:
In October 2002, PayPal was acquired by eBay, for 1.5 Billion dollars. Elon Musk, was one of the founders, and played an instrumental role in the success of the company. His proceeds from the eBay acquisition, was 180 million USD. Here's what he did, in his own words: “I put a 100 million USD in SpaceX, 70 million USD in Tesla and 10 million USD in Solar City. I had to borrow money for rent.” As of July 2017, SpaceX is valued at about 21 Billion USD and Tesla at about 60 Billion USD. Elon has several other ventures he has invested in and himself, has a net worth of about 20.4 Billion Dollars.
It doesn’t really have to be stated, it’s quite obvious- the guy is very successful. Well into his late 40s, he doesn’t seem to show any signs of slowing down. A well planned risk, at the right time, could possibly be the bets decision you've ever made, as an entrepreneur.
When it comes to risk taking, there are a lot of myths that entrepreneurs have, and possibly the biggest one is that ‘risk taking always has a beneficial outcome.’
That is far from the truth. Anything done in extremes is counterproductive- that is as true in entrepreneurship, as it is in real life. You see, there is a huge difference between an uninformed and an informed risk.
Blindly taking risks, for the sole purpose of the adrenaline rush you get from it, will most probably deprive you of all your wealth sooner or later. Taking uninformed risks, is like gambling- while it does work every now and then, there’s only so many times you can get lucky.
As an entrepreneur, one cannot benefit from risks that are taken without any prior calculations or planning. This is where an informed risk comes into the picture.
What is an informed risk?
Also known as an educated or calculated risk, an informed risk is a risk being taken for which the calculated potential payoff outweighs the calculated potential loss, with the amount of information one has available at the time of making the decision.
The difference, in simple words, is that an uninformed risk may possibly cause you to lose more capital than you would have made, in the first place. An informed risk, on the other hand is well worth the risk, and the possible profits outweigh the possible losses.
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Importance of risk-taking, as an entrepreneur:
As an entrepreneur, how would you know about the possibilities an emerging industry has to offer, if you never venture into it? How would you know whether a new way of marketing is effective is not, unless you try it?
As has been mentioned before, in this article, don’t try something without any prior planning. On a similar note, don’t just keep planning and looking for the ‘perfect’ opportunity. If you see a potential opportunity take a leap.
We don’t realize how our requirement of absolute certainty, holds us back, like an anchor that holds a ship in place, preventing us from taking opportunities that might’ve had a potential for huge profits.
As an entrepreneur, you will have times when you have to rely on your intuition, to make decisions, and there’s nothing wrong about it.
As an entrepreneur, every failed venture will teach you a lesson. There is no need to be afraid to fail. If you took an educated risk and still failed, chances are something went wrong in your calculations. If not, it must’ve been a factor you cannot control, and that isn’t directly your mistake.
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