Entrepreneurship isn’t about taking risks
Entrepreneurship is all the rage these days, and I’ve had a lot of people ask me if they have “the right personality type” to be entrepreneurs. They think entrepreneurship is about risk-taking. Entrepreneurs must love risk, right? Since obviously, corporate employees love safety, and they’re the opposite of entrepreneurs. This sounds like a great story and a great rationale. It’s just wrong.
Entrepreneurs generally are not huge risk takers. Indeed, non-monetary considerations are often more important. In fact, many entrepreneurs try to minimize risk. What makes them different from corporate employees is that entrepreneurs maximize experimentation.
A business starts with an idea for a product or service that benefits some market: pink widgets. The business launches the widgets, trying to sell them to football players. No one buys. So they make some blue widgets. Some football players buy, but unexpectedly, many teenage goth girls buy. The next year, the company tries selling blue widgets to teenage goth girls in a different country. They sell tons. They’ve found their product (blue widgets) and their market (teenage goth girls). Now they expand into more and more countries, creating billions of the same products to sell to the same market.
In the early lifecycle, the startup is rapidly experimenting and testing the product idea and the market. Once they’ve found the combination that works, the mindset shifts from rapidly-experiment to scale-the-business. Scaling requires getting good at doing the same things over and over and over. Suddenly, it’s all about doing the same thing over and over, getting better as it goes.
This is a profound shift. Experimentation needs quick decision-making, creative thinking, and a willingness to cut corners as long as you get the learning you need. Scale requires rigor, process improvement, and a willingness to have single-minded focus, and tweak the details so you can be as efficient at mass-production as possible.
That is what you need to assess when deciding whether to pursue something entrepreneurial. Yeah, it’s risky if you don’t control your costs. But that’s only part of the equation. Think less about taking risks, and more about doing experiments. Because at the end of the day, entrepreneurship is about minimizing your risk while maximizing the learning you get from rapid experiments with your product and market.