Think of an entrepreneur, and you probably imagine a risk taker. It’s someone who had the guts to quit their day job to become fully devoted to their passion. It’s throwing caution to the wind! It’s dancing like no one’s even watching! In other words: This person is decidedly not the comparatively cautious and timid you, stuck in your steady day job that delivers a steady paycheck.
And yet the evidence points in exactly the other direction, argues organizational psychologist Adam Grant in his new book, Originals: How Non-Conformists Move the World. The book explores what separates the conformists from the nonconformists, and his research revealed one rather surprising factor about the risk-taking tendencies of those who start their own businesses. Entrepreneurs — or others who’ve found success in some creative, off-the-beaten-path pursuit — are more likely to be risk-averse, in direct contrast to the reckless dreamers many often imagine them to be.
Consider the findings, for instance, of a 14-year study of entrepreneurs, in which a pair of researchers tested whether their participants fared better by keeping or leaving their day jobs. In a study period spanning 1994 to 2008, they followed about 5,000 American entrepreneurs who either did or did not keep working at a day job, controlling for each individual’s financial need. The entrepreneurs also took personality surveys, which, not surprisingly, found that those who did quit tended to be “risk takers with spades of confidence”; in contrast, those who kept their jobs “were far more risk averse and unsure of themselves.”
But in the end, it was the more cautious individuals who came out on top, the researchers found. Those who kept working in their day job had about 33 percent lower odds of failure than their more confident counterparts who quit to pursue their business venture full-time.
Obviously, starting some creative or business venture does involve risk. It’s just the way the most successful of the self-employed handle that risk that seems to make the difference. Grant uses a metaphor introduced about 50 years ago by University of Michigan psychologist Clyde Coombs, that of the stock portfolio. “In the stock market, you protect yourself by playing it safe in other investments,” he writes. “Coombs suggested that in their daily lives, successful people do the same thing with risks, balancing them out in a portfolio. When we embrace danger in one domain, we offset our overall level of risk by exercising caution in another domain.”
Real-life examples of this idea abound. Take Sara Blakely, who came up with the idea for Spanx at the age of 27; she sold fax machines full-time for two years while she worked on the side to develop her product. In the creative realm, there is the writer T. S. Eliot, who stayed in his London bank-clerk job three years after publishing The Waste Land; even when he did finally leave that job, he took up another one at a publishing house, “to provide stability in his life, writing poetry on the side,” Grant writes.
Similar to the day-jobs study, a different survey asked entrepreneurs and traditionally employed adults to choose between the entrepreneurial venture that was most attractive to them. The choices were these, Grant writes:
a. One that made $5 million in profit with a 20 percent chance of success.
b. One that made $2 million in profit with a 50 percent chance of success.
c. One that made $1.25 million in profit with an 80 percent chance of success.
Here again, the actual entrepreneurs in the study most often chose the relative safety of option C. As Grant explains it, “[i]f you’re risk averse and have some doubts about the feasibility of your ideas, it’s likely that your business will be built to last. If you’re a freewheeling gambler, your startup is far more fragile.”
Stories and statistics like these poke some holes in the notion of the free-spirited entrepreneur, which on the one hand is no fun, because “we love the heroic story of the person who risks it all in pursuit of a dream,” Grant told Science of Us. “It’s so much more fun to tell the story of how Bill Gates had such a grand vision for Microsoft that he drops out of college.” Forget about the year he spent selling software, the financial support from his parents, and the fact that he took a leave of absence from school instead of dropping out. “The story’s much more romantic without those pieces.”
And yet Grant says that it’s precisely that vision of recklessness that keeps too many of us from pursuing an unconventional path ourselves. “We look at their choices and say, ‘Well, I could never do that,’” he continued. “And we kind of see their choices as involving risks that we wouldn’t take. When, in fact, if we did a better job of getting inside their heads, [we’d see] the actions they’re taking are not that risky.”
In a weird way, it reminds me of the lessons learned from the psychologists who study those who participate in extreme sports, like BASE jumping. You know — that super-fun sport that involves hurling yourself off some high-altitude cliff, trusting a flight suit modeled after the physics of a flying squirrel to prevent you from falling to your death. Stick with me here. “A lot of these people are highly intelligent people, methodological and systematical,” Eric Brymer, a psychologist at Queensland University of Technology in Brisbane, Australia, told Science of Us last May. True, their preferred form of recreation is inherently risky. (Very much so!) But the most devoted and serious among them avoid the reckless thrill seekers “like the plague,” instead spending months or even years studying and meticulously planning their next jump, “in order to make it as safe as it can possibly be.” Then — and only then — they take the leap.