Reid Hoffman: Entrepreneurs Take Intelligent Risks

Risk is real, and sometimes you fail with risk. And taking risk is essential because if you're not taking risk in order to make a competitive different, make yourself competitively different, to potentially have breakout success and to be learning and adapting to the changing game around you, then by playing it totally safe, you essentially marginalize yourself over time, which is one of the things you can see happening with large businesses that don't take risks as a function of that. But the question is, as risks are not just kind of like, oh, jump into the unknown, do anything. There's different kinds of risks. And part of what is to do is to figure out what risks are intelligent risk, which risks have manageable downside, which risks have potential for upside, which ones you can get a sense of early and it's not fatal. These sorts of things are part of taking intelligent risk. And the whole point about taking risk is. So, for example, classic good, so 1950s investment dictum is buy low, sell high. Well, how do you buy low, sell high, whether it's in your career or stock market, et cetera? Well, the way you do that is you have a contrarian viewpoint that happens to be right. Because if everyone thought, oh, that's what you should buy, well, then of course it's impossible to buy low because everyone else is doing it. So part of taking that risk is figuring out essentially, how do you see something that other people don't see? And then test it in terms of what you're doing. And there's all kinds of ways to try to figure out how to minimize what is scary about risk. You can, for example, figure out, well, is there some way I can test doing this? There's things about like talk to other smart people, get a sense of feel of what it is to essentially kind of go, okay. One of the frameworks we have is called ABZ planning. Well, the Z plan is all right. When I know this is going bad, how do I reset to doing another plan? This kind of risk taking, of deliberately going, what kind of risk can I take? That establishes something that's different potentially. Breakout is one of the things that entrepreneurs do all the time. They do all the time in their companies because they essentially, if they don't have something substantive, competitive differentiation, the market's occupied, so you have to take a risk in going somewhere.