Life Equals Risk: Fear and Risk Tolerance (part 2)

“No passion so effectively robs the mind of all of its powers of acting and reasoning as fear.” ~Edmund Burke

Why do some people spend their lives wishing for something while others are living their dreams?

Ronald Heifetz, professor at Harvard University’s John F. Kennedy School of Government, answers by saying,  “Making real decisions and taking real risks requires freedom – freedom from the loyalties, expectations and fears that inevitably fog our risk-vs.-reward equation.  Peoples’ choices to take or refrain from risk are over-determined by their culture.” Professor Heifetz’s quotation about culture determining risk tolerance is provocative but only scratches the surface.

Is there something beyond culture that makes some people more willing to act on their wishes – to take more risks than others?

Psychologists have theories but now geneticists are weighing in. The BusinessWeek article, Innate Risk-Takers introduces the book, “Born Entrepreneurs, Born Leaders: How Your Genes Affect Your Work Life”.  The title may lead us to believe that entrepreneurs are hard-wired for leadership and risk but the story and theory don’t end there.  Our genes may impact in-born behavioral styles but we humans are far too complex for sweeping genetic generalizations – nature and nurture play very important roles.  A single source, book or risk-taking assessment cannot identify your true risk-taking style, much less how you react to various risk situations.

To begin to illustrate this complexity,  I’ll disclose a few high and low risk tolerance traits (as described by the books) and how nature/nurture contribute to my personal risk tolerance. 

Please use the bullets as a prompt to consider factors that may impact your risk tolerance.

I’m risk-tolerant - by the books, because:

• I’m at my best under pressure – enjoyed emergency ambulance work.
• Enjoys speed, rollercoasters, and had a (before parenthood) desire to skydive.
• Primarily exhibits “Dominance” and “Influence” behavioral styles in work environments (they love spontaneity, fast pace, risks and challenge)
• Those with the birth sign of Aries are known for adventure, pioneering, optimism and risk-taking.

I have always considered myself risk-tolerant, yet just yesterday, my husband described me as risk-averse!  It surprised me but made sense at the same time. Here’s why it’s not so simple:

I’m risk-averse - by the books, because:

• I like surprises…just not bad ones.  My mind works to troubleshoot what can go wrong with anything/everything – I want to be prepared.
• Moving from middle class to relative poverty as a child created strong financial sensibilities. I don’t worship money and I don’t waste it.
• When I’m not in the role of boss, my “Dominance” behavioral style is replaced with “Steadiness” and “Conscientiousness” (full focus on helping.  I can be spontaneous but prefer to research decisions and to plan)
• Working in allied health and having a child with dairy anaphylaxis has made me keenly aware of risks that others may not consider – hence, more cautious.

~ What is your mix of risk-tolerance and risk-averse nature/nurture traits?

~ How did my risk tolerance equation factor in the biggest risk that I have personally taken…leaving a six-figure salaried job and starting my own business in 1997 as a single mother with no other source of income?

For me, risk tolerance is largely about fear management.

I was only able to manage the fear with an equal mix of:

using my head – following my heart – and trusting my gut.

Please share your ideas and experience and/or read part 1:

• When have you felt the fear and decided to do it anyway?
• What did you learn about risk, fear and yourself?

Do YOU Have What it Takes to be an Entrepreneur? Part I

Entrepreneurship requires a passionate desire and work ethic to write your own ticket and/or to bring a product to market.

Regardless of how great your idea or passion, it’s vital to acknowledge that entrepreneurship is fundamentally about taking risk, so the first thing to assess is your risk tolerance.

According to the Small Business Administration‘s 2009 Frequently Asked Questions, 7 out of 10 new small businesses (<500 employees) last at least 2 years but only about 1/2 of new businesses are still in business after 5 years.  The first question, then, is are you willing to wager your financial stability, security, and possibly your credit rating?

The statistics are only a reality check – don’t let them discourage you.  While risk tolerance is a big factor, having enough of a fire in your belly can go a long way toward minimizing the fear factor.  The Harvard Business Review offers a quick quiz to help you identify if you have the gut-level fit for taking the plunge.  To sum up the drive vs fear issue, my online colleague, GL Hoffman, said something that is very telling, “When people ask me whether they should become an entrepreneur, I tell them, if you have to ask, then I’m leaning toward answering, no.“ Case in point, during a succession planning meeting (when I was a Training Director in a fortune 500 pharmaceutical company) the HR Director asked me what I wanted to be doing 5 and 10 years in the future.  I quickly stated the 5 year plan but fell silent about the 10 year plan because it did not involve staying with the company.  I was already certain that I wanted my own training business.  And in 1997, as a single mother with no other form of support, I quit my job and started Emp-Higher Performance Development, Inc. Was I afraid?  A little, but I had a tremendous passion for the training business (and still do!) a great credit rating, clarity about my personal development needs, and a plan to boot-strap my business. Thirteen years later, I haven’t looked back or been sorry for even a moment.

Yes, there are a lot of other traits, competencies and skills that differentiate entrepreneurs who make it  from  those who don’t – a topic that merits its own post so I’ll detail those in part II.  Since I just mentioned GL Hoffman, it occurs to me that as a serial entrepreneur, a book that he recently published is an excellent and inexpensive reality check for those considering entrepreneurship or for entrepreneurs interested in increasing their probability for more success. The book, Start-up: 100 tips to get your business going is packed with tried and true success factors, is a quick read and handy reference. Most interesting to me was that despite our very different business models, his tips still rang true.  I found myself nodding and mumbling, “yep” during many of the passages – particularly tips 9, 12, 15, 16, 18, 38, 47, 48 and 50 – and that was only the first half of the book!  So, I recommended that you read it, ask yourself if you could see yourself actively doing the best practices that he suggests… and if not, why not?

What other questions or advice do you have about identifying who is cut out for the entrepreneurial life?