I was reading yet another article on how business people succeed by taking risks. We are talking about people who gamble everything on opening a business where they get down to the last few dollars before they find success.
Attribution: Flickr - Images Money
Businesses both new and old are being told this is the model of behavior. Look at this person, they took a risk and succeeded. However is this sort of risk taking behaviour good or bad for business?
We only talk about the risk takers that succeed
I could go down the to local casino now and put all my savings onto red 23. If I put $10,000 down I could walk away with $350,000. However no one would recommend that as an investment strategy.
Attribution: Flickr - M4D Group
In the same way large numbers of businesses fail taking risks and the greater the risks the greater the chance of failure. However we only hear about the people who succeed. It is like adverts for casinos only show people winning and not the majority who lose.
Risk takes keep taking risks
One the most famous risk taking companies was Atari.This was a company that took a risk in creating
the world's first arcade video game. They continued to task risks for 10 years, so that they were betting the company on each new game and console. A strategy that would never be sustainable as any one failure is enough to doom the company.
Attribution: Flickr - Paxson Woelber
Most companies that succeed in the long-term go from a risky venture to more stable business practices. The cult of risk can threaten even well established businesses, as we saw in the global financial crisis.
Risk takers often have other personality problems
Risk taking is associated with anti social personality disorder. This is the newer name that used to be called psychopathic personality disorder. Basically people who are going to take huge risks are likely to be psychos, which means they also more likely to lie or commit criminal behaviour.
Do we really want to invest with these people or have them running our companies?
We admire risk takers
Why do investors give their money to people driving fast cars and wearing expensive suits. These should be the last type of people we would want to trust with our money. However we want to be that person, we want to have that opulent lifestyle, we want to take risks and succeed and be fearless.
We love risk takers, if they succeed.
Is the cult of risk good or bad for business?
Risk taking can valuable. Setting up a business with a new idea is a risk and if you can't take risks you will never be able to start your business. Established companies have realised the value of these types of risks, however they have learnt not take the risks themselves but to buy out companies others have established.
The cult of risk takers as heroes can be damaging to business. While risk is important, in good business people take sensible risks where appropriate.