The entrepreneurial mindset: why it’s less about the risk than how you approach it

Photo credit: Alex Wong.

I recently heard a discussion about the entrepreneurial mindset and what that means. The opinion given to the audience by the speaker was that an entrepreneurial mindset was one that takes big risks. Based on this theory, if you don’t take a big risk, you won’t get a big return. Therefore, as an investor, the speaker concluded, we need to find people who are willing to take big risks because venture capitalists are in the business of big returns.

It’s not about the magnitude of the risk as the speaker alluded to, it’s about how you approach that risk.

I find this opinion simplistic, and if this dogma is left unqualified, it can result in very dangerous thinking. In fact, I would define the entrepreneurial mindset completely differently. It’s not about the magnitude of the risk as the speaker alluded to, it’s about how you approach that risk.

The problem with the definition above is that we cannot differentiate between an entrepreneur and a speculator. Some might think the two are the same, but I believe that there is a difference. Let me explain:

The only similarity between the speculator and the entrepreneur is that both take big risks. However how the two approach the risk is entirely different. The speculator is an individual who hopes he will make money on investment. He places a bet and accepts the odds that are given to him. He prays and hopes that he is correct. He buys a lottery ticket, buys a stock on a stock tip, and he hears that people have been making money on property and buys an investment property for rental.

An entrepreneur, on the other hand, does not accept the odds given to him. The mindset of an entrepreneur is that he believes he can change the odds through his actions or belief system. Therefore, when other people look at an opportunity and see risk, an entrepreneur looks at that same situation and thinks that those odds don’t apply to him, and he has a defined and actionable strategy to mitigate these risk factors.

This is why when Elon Musk looks at the rocket business, while other people see intolerable levels of risk, Elon sees opportunity. He sees the ability to take actionable steps to redefine the cost structure of the rocket business.

This is why when other individuals thought we were crazy to try and start the Asian Food Channel, me and my business partner saw a way of launching a TV channel using significantly less capital and using a cost structure that is radically different from traditional broadcast businesses. We did not accept the odds that were given to us. We believed we had a way of changing those odds so that the risk was lower than what other people perceived them to be. 

Looking at it from a different angle, the speculator and the entrepreneur face fear differently. A speculator looks at the potential of making a significant upside, and the greed and excitement of potentially succeeding blinds the fear from his mind. This is why when you hear property agents tell you tales of how people have made big money from flipping properties, and they use that as the only reason to convince you to buy a property, that either your bullshit meter goes through the roof, or you forget your fear and part with your money.

The entrepreneur, however, has a different mindset. A good entrepreneur faces the fear head on and realizes that his chances of failure are high. However, he does not let that stop him from moving forward. Unlike a deer in headlights, a great entrepreneur does not freeze up. Instead, he uses that fear to motivate himself into action.

He realizes that he has to start forming a strategy to lower his risk profile and therefore increase his probability of succeeding. He works hard to find advisors, great investors, and supportive customers; he searches night and day through his contacts to hire and convince talented individuals to join his team, he obsesses about the competitive dynamics of his chosen industry and finds ways of gaining an edge over his competitors. He feels the fear but goes through with the risk anyway.

When we meet people whose only answer to why they want to be an entrepreneur is because they want to make money, we usually don’t invest in them. In fact, I recently told someone that if they wanted a surefire way of making a living, then dentistry is not a good bet. People will always need their teeth cleaned, and it’s hard to see robots doing this job in 30 years. I said this because very few people truly have an entrepreneurial mindset. These people are hard to find, so we spend a lot of time talking to potential investee companies and seeing if they are mere speculators or smart, ninja-like entrepreneurs.

Only when we meet people with big ideas and a plan on how to get there, do we call them entrepreneurs.