Tolerance for Risk—An Entrepreneurial Mindset
Written by Executive Director, Dan Cohen
I recently participated in a session on the entrepreneurial mindset at USASBE (United States Association for Small Business and Entrepreneurship)—a major entrepreneurship conference. Researchers have developed an empirically validated assessment that assesses one’s entrepreneurial mindset. In this assessment it is noted that there are seven personality traits (that are not typically very amenable to change) and seven skills (much easier to develop and change) that comprise the entrepreneurial mindset. One of the personality traits listed is risk acceptance. I (and I bet that most people would agree) typically think of this as tolerance for the possibility of losing money. As part of the session, I took the assessment and scored off the charts on risk acceptance. This is not all that surprising given my entrepreneurial career. Something happened at this conference, though, that made me understand that risk acceptance goes way beyond the possibility of losing money.
Wake Forest University Center for Entrepreneurship was a finalist for the Model Emerging Entrepreneurship Program Award against Florida State University. FSU recently secured $100 Million in funding and launched the Jim Moran School of Entrepreneurship—the first ever school for entrepreneurship at a public university. They have five entrepreneurship majors along with eight minors. To give some context on the sheer magnitude of that gift, they could build a building identical to Farrell Hall and still have $44 million left over to operate their program! However, none of that intimidated us as we prepared for the competition. We worked hard and created a presentation that we felt was done well enough to win. We practiced thoroughly and delivered an outstanding presentation to the judges. We lost, by a split decision vote, to Florida State.
A respected colleague suggested that I share that while we lost against a worthy adversary, we would not lose again. Nonsense, I quickly retorted. The entrepreneur is a born competitor seeking to prove him/herself against the best competition out there. Is winning fun? Yes, winning is awesome!! It is all the more sweet, though, when you have tasted the bitterness of defeat. You learn much more from losing because you examine possible causes and effects, whereas winning is usually just celebrated. Bill Bowerman, the legendary coach of Oregon and co-founder of Nike, taught his runners that high-level training, eating well, weight-training, and rest were all table stakes to compete against the best. He taught his athletes that if you do all that well, you put yourself in position to win. Despite that, you will lose most of the time. When everything breaks right, you win. You have zero chance of winning, though, without putting yourself in position to win. Tiger Woods has won 14 majors and has made a career of chasing Jack Nicklaus’ record of 18 majors—a phenomenal feat! Most sports fans know that Nicklaus has won 18 majors. Most do not know, though, that he finished second 19 times in majors!
This brings me back to the original topic of this post—risk acceptance. My experience in the entrepreneurial mindset session and my results from taking the assessment tell me that I have a very high tolerance for risk. What I realized from this experience—from assessing our loss to Florida State—is that this tolerance is much broader than just financial risk. We did not go into this competition thinking that second would be good enough against a foe with a big resource advantage. We were all in to win it and we put forth the preparation worthy of a winning effort. We could live with any outcome if we felt we competed to the very limits of our ability. When I was an entrepreneur, I developed very strong sales skills—a necessity for entrepreneurs. I was closing about 65% of my sales, a very high percentage closing rate in our industry. Still, I failed 35% of the time. I loved the competition and I especially loved going after the big sale against top competition. Winning is so gratifying in part because, as any true competitor knows, losing is a real part of the equation. Tolerating the possibility of losing is the psychic risk that accompanies financial risk. To me, I would gladly take pushing my limits and risking a hard beating any day over sitting on the sidelines because of being afraid of losing. To my fellow entrepreneurs: pick your battles wisely and compete with all your heart with zero fear of failing. If you do this often enough, winning will happen.