Inc.com is celebrating its 30th birthday with some fascinating articles including an interview with Jim Collins. The interviewer asked for his definition of entrepreneurship which involves a paint-by-numbers vs. blank canvas analogy. However, the follow up question and answer was notable:
It has to do with your ability to handle risk, no?
Not risk. Ambiguity. People confuse the two. My students used to come to me at Stanford and say, “I’d really like to do something on my own, but I’m just not ready to take that much risk. So I took the job with IBM.” And I would say, “You’re not ready for risk? What’s the first thing you learn about investing? Never put all your eggs in one basket. You’ve just put all your eggs in one basket that is held by somebody else.” As an entrepreneur, you know what the risks are. You see them. You understand them. You manage them. If you join someone else’s company, you may not know those risks, and not because they don’t exist. You just can’t see them, and so you can’t manage them. That’s a much more exposed position than the entrepreneur faces. But there’s lower ambiguity on the paint-by-numbers path: very clear but more risky. The entrepreneurial path: very ambiguous but less risk. Of course, the truth is that it’s all ambiguous, anyway. If you think you can predict the future, you’re crazy.
That ought to get your mind racing this Monday morning. As being someone on both sides of the proverbial fence, I know exactly what he is saying. The key component to managing risk is seeing/knowing the risk. Ignorance of the risk is tolerable to those who don’t possess the entrepreneurial spirit.