Here’s why keeping your day job makes your startup more likely to be successful

The following is an edited excerpt from Adam Grant’s Originals: How Non-Conformists Move The World. The excerpt was provided by Viking Publishing. You can purchase a copy of the book here.

In a fascinating study, management researchers Joseph Raffiee and Jie Feng asked a simple question: When people start a business, are they better off keeping or quitting their day jobs?

From 1994 until 2008, they tracked a nationally representative group of over five thousand Americans in their 20s, 30s, 40s, and 50s who became entrepreneurs. Whether these founders kept or left their day jobs wasn’t influenced by financial need; individuals with high family income or high salaries weren’t any more or less likely to quit and become full-time entrepreneurs.

A survey showed that the ones who took the full plunge were risk takers with spades of confidence. The entrepreneurs who hedged their bets by starting their companies while still working were far more risk averse and unsure of themselves.

If you think like most people, you’ll predict a clear advantage for the risk takers. Yet the study showed the exact opposite: Entrepreneurs who kept their day jobs had 33 percent lower odds of failure than those who quit.

Risk-averse founders are ahead of the game

Photo credit: Alex Wong

If 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.

The entrepreneurs whose companies topped Fast Company’s recent most innovative lists typically stayed in their day jobs even after they launched. Former track star Phil Knight started selling running shoes out of the trunk of his car in 1964, yet kept working as an accountant until 1969. After inventing the original Apple I computer, Steve Wozniak started the company with Steve Jobs in 1976 but continued working full time in his engineering job at Hewlett-Packard until 1977.

And although Google founders Larry Page and Sergey Brin figured out how to dramatically improve internet searches in 1996, they didn’t go on leave from their graduate studies at Stanford until 1998. “We almost didn’t start Google,” Page says, because we “were too worried about dropping out of our Ph.D. program.” In 1997, concerned that their fledgling search engine was distracting them from their research, they tried to sell Google for less than $2 million in cash and stock. Luckily for them, the potential buyer rejected the offer.

Half a century ago, University of Michigan psychologist Clyde Coombs developed an innovative theory of risk. In the stock market, if you’re going to make a risky investment, you protect yourself by playing it safe in other investments. 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. If you’re about to bet aggressively in blackjack, you might drive below the speed limit on your way to the casino.

Risk portfolios explain why people often become original in one part of their lives while remaining quite conventional in others.

Baseball owner Branch Rickey opened the door for Jackie Robinson to break the color barrier, but refused to go to the ballpark on Sundays, use profanity, or touch a drop of alcohol. T. S. Eliot’s landmark work, The Waste Land, has been hailed as one of the 20th century’s most significant poems. But after publishing it in 1922, Eliot kept his London bank job until 1925, rejecting the idea of embracing professional risk.

As the novelist Aldous Huxley noted after paying him an office visit, Eliot was “the most bank-clerky of all bank clerks.” When he finally did leave the position, Eliot still didn’t strike out on his own. He spent the next forty years working for a publishing house to provide stability in his life, writing poetry on the side.

What’s a balanced risk portfolio?

The myth of the risk-taking entrepreneur