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Do Entrepreneurs Hate Risk as Much as Professors?

risky ride | BIGG SuccessWe saw a great article over at Business Week by G. Michael Maddock and Raphael Louis Viton, respectively the CEO and President of Maddock Douglas.

They note a new phenomenon:

Large companies are hiring professors to teach them how to innovate.

The authors assert that it’s misguided:

“What big, process-driven companies need is to learn how to think like entrepreneurs. And it may surprise you that entrepreneurs hate risk, too. Unlike many professors, entrepreneurs feel comfortable not knowing what comes next, but they don’t see this as risk.”

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George KruegerI feel stuck between two worlds – I’ve taught entrepreneurship at our local University for years and I’ve been an entrepreneur even longer.

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Mary-Lynn FosterYou have the heart of an entrepreneur, though, George. It’s definitely where your passion lies.

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According to the authors, entrepreneurs mitigate risk by:

This is great advice for those of you thinking about starting your own business. Contrary to popular myth, successful entrepreneurs are not risk lovers. However, they are excellent risk managers.

They think differently. In business school, we learn that you have to take larger risks to earn a greater return.

Entrepreneurs know this isn’t necessarily the case. They focus on making the downside acceptable and let the upside take care of itself.

Do you have an idea for a business? Could you use some help reducing the risk? Check out our coaching packages.

Image in this post from mzacha

Think Like an Entrepreneur

a chess game which has similarities to having to think like an entrepreneur“Failing to plan is planning to fail.” ~ Ancient Proverb.

“Begin with the end in mind. Then put first things first.” Stephen Covey, The 7 Habits of Highly Effective People*.

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In business school, we’re taught to define our goals, given our available resources, and then find the critical path to reach them. This is called causal or predictive reasoning, according to Saras Sarasvathy.

She teaches entrepreneurship at the University of Virginia and is the author of Effectuation: Elements of Entrepreneurial Expertise and recently released an updated version of this book in paperback.

She says that successful entrepreneurs don’t think like MBAs. In fact, they do the opposite. They use effectual reasoning. Entrepreneurs who reach bigg success use the resources available to them. They let goals manifest themselves over time given their creativity, direction and connections.

Entrepreneurs think differently than MBAs

There’s a great article on Harvard Business  site about Dr. Sarasvathy’s research. It asks if MBAs or entrepreneurs are better suited for today’s business realities. Bill Taylor, the author, says it simply:

  • MBAs focus on the upside; entrepreneurs focus on the downside.
  • MBAs assume it’s a zero-sum game; entrepreneurs think win – win.
  • MBAs thrive on certainty; entrepreneurs thrive on uncertainty.

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george I’m even more confused than usual. I just don’t know what to think since I sort of fit into both categories!

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marylynn
Do you feel like you’re getting pulled in both directions at once, George?

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george
I feel like I’m getting stretched like Stretch Armstrong!

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marylynnWell, there is an answer. You just have to know when to use causal reasoning and when to think effectually.

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We define bigg success as life on your own terms. You are the entrepreneur of an incredible enterprise – your life – whether or not you’re an entrepreneur in the traditional definition of the word.

That’s why we think this research is so fitting not just for business owners, but for everyone:

When things are uncertain, think like an entrepreneur.

It appears that, in the years ahead, we need to expect more of the unexpected. Entrepreneurs don’t bother trying to predict the future; they create it.

How do they do that?

They act and adapt.

They use the resources they have to try something. If it doesn’t work, they take the knowledge they gained and try something else.

If it does work, they keep pushing it. As their enterprise grows, when there is more at stake, they may switch to more causal reasoning. Or they may jump ship and start the whole thing over!

Because to many entrepreneurs, the journey is the reward. That mindset often leads to bigg success.

Thanks so much for reading our post today. Please join us next time as we discuss when the dream becomes a nightmare. Until then, here’s to your bigg success!

Direct link to The Bigg Success Show audio file:
http://media.libsyn.com/media/biggsuccess/00447-072809.mp3

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Can Happiness Buy Money

golden_eggWe’ve heard it again and again … money can’t buy happiness. According to the Beatles, it can’t buy love either!

But what if the order is reversed? Can happiness buy money?

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The latest research supports the notion that happiness can buy money[PDF]. It comes from a team effort with researchers from the University of Virginia, Michigan State University, and last but certainly the most, the University of Illinois. Okay, we’re biased but at least we admit it.

Happiness buys an extra $8,263 a year!

The researchers surveyed incoming freshmen at 25 elite colleges. We’re not sure how they defined “elite”, but we’re pretty sure it’s the schools we attended!

The participants reported their cheerfulness. 19 years later, when the participants were about 37 years old, the researchers asked them to report their annual income.

On average, the participants in the highest 10% on the cheerfulness scale earned over 15% more than those in the lowest 10%. In 1995 dollars, this was a difference of $8,263 a year, on average ($62,681 vs. $54,318).

Attitude to altitude

That’s a bigg difference. So not only can happiness buy you money, it can buy quite a bit of it! Apparently attitude does determine altitude!

That’s one of the bigg takeaways here. If we approach the days of our lives with the right attitude, we’ll be more productive. We’ll show more initiative. We’ll get more opportunities.

More money, less risk

We also found it interesting that the most cheerful participants were one-third less likely to ever be unemployed than the least cheerful. It appears that being of good cheer not only helps you be more prosperous, it reduces your risk as well. That’s a slam dunk!

And it flies in the face of conventional wisdom. We learn in business school that you have to take more risk to make more money. But as this study shows, you can make more money and actually have less risk with the right attitude!

That’s the bigg idea behind bigg success – to get all areas of our lives working harmoniously by finding synergy like what we see here.

Being too happy is costly

Here’s a surprising twist from this study: People who were moderately cheerful (above average on the researchers scale but not in the top 10%) earned the most on average.

They made almost 6% more than those in the top 10% and about 22% more than the bottom 10%. In 1995 dollars, that means they earned $3,563 and $11,826 more than the highest and lowest deciles respectively.

So being really happy leads to much better income than being really unhappy. But being happy instead of really happy is even better yet!

It turns out that Droopy had it right. He never said, “I’m really happy.” Just “I’m happy.”

Bigg Success is the community of bigg goal-getters. People who are usually happy, but never content. This research supports the notion that this “happy, not content” attitude leads to bigg success.

Thanks so much for checking in on us today. You can get more tips and tools to be a bigg success by subscribing to our free weekly newsletter.

Please join us next time when we’ll discuss what entrepreneurs have that MBAs don’t. Until then, here’s to your bigg success!

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Direct link to The Bigg Success Show audio file:
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(Image in today's post by Mattox)