Dr Jeff Cornwall

“I could never start my own business. I cannot tolerate that kind of risk. After all, entrepreneurs are nothing more than gamblers who are willing to bet it all on a hunch of a business idea.” Many people view entrepreneurship this way. To them entrepreneurship is as nothing more than a crap shoot. However, when we study financially successful entrepreneurs a very different picture emerges.

This primary cause of this myth about entrepreneurs comes from a misunderstanding of risk. Risk is erroneously defined only in terms of the downside potential of the business. This can be thought of as “Sinking the Boat Risk“. Ultimately, this could be the failure of the business. We read over and over that 80% of business start-ups fail. While this is may be true to a point, this risk can actually be drastically reduced with proper training and preparation as discussed in a previous posting on this site.
In our writing about the “Good Entrepreneur”, Mike Naughton and I talk about the virtue of prudence as playing such an important role in managing this type of risk. If entrepreneurs view their role as one of being a steward of the resources at their disposal, they begin to take a much more careful and thoughtful approach to business formation. The true act of entrepreneurial courage from this perspective is not blindly forging into a new venture, but rather become one of a willingness to only move ahead when “Sinking the Boat” risk is minimized.
The view of entrepreneurs as gamblers obscures another key aspect of risk. “Missing the Boat” risk refers to what economists call the opportunity cost of not acting on a viable business idea. That is, there is a risk that is associated with not acting on an opportunity just as there is a risk associated with acting, but failing. In fact, failure to act on a business opportunity that has real potential for success can be seen as being equally imprudent and shows poor stewardship of the resources at your disposal (and ultimately the gifts you have been given). Succumbing to fear and not moving ahead can be viewed as the vice that corresponds to virtue of the courageous act of starting a new venture.
The successful entrepreneurs I have been associated with are rarely gamblers. In fact, they are careful, thoughtful business people who understand the risk of moving ahead, and approach that risk with a sober understanding of their responsibilities.