Risk and Reward

Peter Drucker, one of the most influential management theorists of the 20th century, put it succinctly: “All profit is derived from risk”. Of course, everyone is eager to get something of value for nothing, without worry or effort. But reality with a firm hand stops such infantilism. Risk, like an exam test, separates the majority of those who only want it from the few who are willing, ready, and able.

No one likes risk, per se. Even the serial entrepreneur goes for it with a fiddling heart. Of course, he will do everything he can to eliminate the “stupid risk” — the one that destroys rather than generates profit. But the bottom line is market risk, which cannot be avoided. So the founder voluntarily and deliberately takes a step into uncomfortable uncertainty. The investment of capital, time, and effort in a new business illustrates this most clearly. The most valuable resource has to be let loose at first, only to receive a generous reward from Mr. Market, sometimes 5 or 10 years later. Or get nothing, which happens depressingly often. Even in the United States, without epidemics, revolution, or war, 20% of new businesses fail in the first year, 50% within five years, and 65% within 10 years [1].

The insidiousness of risk is that in the real world, that is, outside social networks, university campuses, and progressive coffee shops, there are no guarantees, no justice, and no mercy. The entrepreneur is left to do the best he can and then accept what will be. His willingness to take significant risks is incomprehensible to almost no one. So the existential loneliness of the entrepreneur is inevitable. But when the gods accept the sacrifice of the daredevil and lavishly shower him with gifts, the envy of the philistine is ridiculous, though understandable. Deep down, everyone is aware of the sparks of curiosity and determination to look into the Unknown. Fortunately, there is no need to risk it all at once. Just as with weights, the risk can be dosed to get used to a gradually increasing load. In the end, you may be surprised at the amount of profit you can extract from the additional risk you have accepted.

Yours sincerely,

-Alexander

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Alexander Lyadov

Alexander Lyadov

As a business therapist, I help entrepreneurs to navigate faster in non-standard situations.