An article in the Wall Street Journal Magazine (Soapbox The Columnist feature, July/August 2013) offered advice from six individuals whose work entails considerable risk. These six individuals participate(d) in risky activities such reporting on wars, investigating infectious disease in the jungle, climbing Mount Everest, and winning an Olympic skiing medal. Only one of the six was in business, successfully founding restaurants, an endeavor for which the risk of failure is high. According to my research, many of the same principles offered by these six individuals apply widely to successful strategic risk taking in business.
For example, risk takers in the Wall Street Journal Magazine article made statements such as “…I am extremely careful and take the necessary precautions…” (infectious disease research) and “… because of the hard work I do in the gym–training and getting stronger—I’m able to be a lot more calm about the risks I take…” (Olympic skier). These statements are consistent with my research which finds that not high risk, but prudent risk, leads to high reward. Taking precautions and being better trained reduces what might otherwise be high risk. With training and precautions, the situation shifts away from high risk–which generally is not the path to high reward–to prudent risk–which leads to high reward.
Training and precautions are also consistent with the advice from successful entrepreneur Richard Branson, who is well known for taking risks such as promoting his business by flying across the ocean in a balloon. Branson advises to always protect against the downside. Furthermore, training develops strength and expertise. And, building upon strengths and expertise reduces risk, making great rewards more likely. I discuss these issues in my January 2009 newsletter article “Does High Risk Lead to High Reward?”
Based upon my 25+ years of research, one of the most important points in that Wall Street Journal Magazine article was made by Bear Grylls, a successful adventurer who climbed Mt. Everest. As Grylls points out, “There are bold mountaineers and old mountaineers, but not many old ones and bold ones!” Essentially, he is saying that the bold ones do not survive, thus, never become both bold and old.
According to my research, this is so true in business. Business success comes from evolutionary steps, not from radical bold moves. Unfortunately, making bold moves often has a favorable connotation, even though the boldest moves generally are not Winning Moves. That’s why it is ever so important to avoid moves so bold that they lead to disaster, as bold moves easily can. In keeping with the advice from Grylls, you want to survive and be able to become old, rather than being destroyed by your boldness.
Finally, I’d like to address the point made in the Wall Street Journal Magazine article by a successful restaurant founder who says, “In order to learn, you have to take risks.” He’s right that a great deal can be learned even when risks don’t turn out well, just as he apparently learned a lot when an earlier restaurant he founded failed. However, his advice is not as clear cut as the others because learning can also occur with very little risk. For example, before someone takes the risk of flying a jet plane, they’d want to first learn in a simulator. Yes, it’s true that you learn a lot by actually trying to do something. But, you do not necessarily have to experience major failure to learn what you need to know for achieving great success and high reward.
