Un-Risky Business: Six Ways Entrepreneurs Master Risk
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The most common misconception about wealthy entrepreneurs is that they’re risk takers.
As an example, people who believe this will tell you that Bill Gates dropped out of Harvard–talk about a sure-fire way to land a primo gig–to start Microsoft. Dropping a sure thing to pursue a whispy dream is the stuff of entrepreneurial legend.
But it’s not exactly how it happened. Gates took a leave of absence from the school, so he could re-enter if things at his fledgling company didn’t turn out as planned.
Gates’s story proves that successful entrepreneurs rarely take risks; rather, they take calculated risks. Here are six ways entrepreneurs approach and master risk-taking–and how investors can use them to manage their own risk.
Hedging
One way entrepreneurs master risk is through hedging. Hedging allows an entrepreneur to benefit no matter what way a decision turns out. If an entrepreneur opens a new business, she may become a supplier with her old boss to keep those lines of opportunity open, if troubles arise.
Burn The Boats, But Keep The Muskets
When Spanish Conquistador, Hernando Cortez, burned his ships, his message was clear: you either conquer, or you die. But you notice, Cortez didn’t bury his weapons, or toss off his armor. Entrepreneurs may jump headlong into the fray, but they keep the skills and knowledge that will make them successful in any venture.
Learn, Baby, Learn
Skills and knowledge master risk. Sometimes, taking a calculated risk, failing and learning from the result is just one more way an entrepreneur masters a skill or builds a business.
Charge Both Ways
There’s a story from the Civil War about notorious cavalry leader Nathan Bedford Forrest. Forrest, who made a habit of flanking the enemy, discovered that he, himself, was surrounded. Forrest’s order: split up and charge both ways. Entrepreneurs use this strategy to master risk when they keep their full-time job, while pursuing their startup passions on the side.
Details, Details, Details
A final way that entrepreneurs master risk is through control of the little things. By keeping as many factors that influence success, they increase the odds that they’ll be successful. Look at how Bill Gates’s friend Warren Buffet approaches investing. He rarely makes a long-shot; instead, he makes sure bets using precise inputs to measure the success of an investment.
Leave Emotions Out Of Your Decisions
Emotions intensify risk for the entrepreneur. Following a gut instinct is one thing; following greed or fear is another.
Investing
These lessons aren’t just great ideas for how to start and run a fledgling software business.
When you start to look at investing as a risk-mastery endeavor, you can use these lessons to improve your odds of taking successful positions.
For example, creating and balancing a diverse portfolio might be one way to improve risk. It’s a form of hedging, actually.
Using Automated Trading strategies and other forms of technology to lessen the interference of emotions can also decrease risk, when used properly.
Another way to decrease risk is to have a definite exit strategy–not unlike Gates’s leave of absence. You can always pick up where you left, once your investment shows signs of establishing a tradeable pattern.
What about you?
Do you have any tips or secrets that help you un-risk your business or investments?
Related posts:
- 15 Ways To Simplify Your Trading
- Ten Ways To Make Money Without Trying
- Top Investing Mistake #5: Not Managing Risk
- You Can’t Win for Losing: Why Money Management Matters
- 17 Blogs For The Instant Entrepreneur
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is one of my favorite financial books of all time. It's an allegory about a guy who has a terrible job, and how he overcomes challenges to achieve his dreams.
