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Reckless risk-taking  

Philip Kaplan proposes that instead of worrying about low-probability risks, an entrepreneur should just power on ahead and sign whatever the client asks:

This lesson in total disregard for risk served me well. They say entrepreneurs are risk takers. I think of myself as too lazy and irresponsible to fully understand the risk.

It works for me.

I'm not sure what the lesson is here.

I think this falls squarely in the "very dangerous, easily misunderstood lesson" category.

If you met someone who crossed the road with his eyes closed his whole life, and said "no need to worry about crossing the road, just close your eyes and go right ahead - it's worked for me so far" you wouldn't take that advice seriously.

Now, the reality of entrepreneurship is that standing on the side of the road worrying about the cars costs more than just crossing, and if a car does hit you it won't necessarily cost you your life. So, it makes sense to just decide and go with it rather than worry about things too long.

However, that doesn't mean that you should take risks on casually and naively. The best entrepreneurs are risk-takers in the sense that they will take measured, calculated, mitigated risks for the chance of good rewards. They are not risk-seekers, they will not seek out unnecessary risks, nor will they naively accept every risk that comes their way.

In the examples he cites, Philip had an experienced entrepreneur looking over his shoulder, and also used his own gut feeling to help him make the decisions. What's not mentioned in this anecdotal article is all the deals he rejected before they even got to the contract stage, because he had a bad feeling about them.

As a smart founder, you need a bias towards making decisions, and you need to be willing to take calculated risks (ideally risks with a small, limited downside and a large, unlimited upside). But you should still think through what risks you are taking on, and do whatever you reasonably can to minimise those risks.

In other words, don't wait until you have a live GPS map of all the traffic before crossing, but do open your eyes and look both ways.

More from the library:
Take a pay cut to work at a startup
Sell the dream, not the job
Setting up your accounting system