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Are Entrepreneurs Really Predators?

Posted by: Anonymous on April 15, 2010 Source: e360 Blog

As entrepreneurship has emerged as a global phenomenon, it is apparent that many popular entrepreneur myths remain. Among them, none is perhaps more common (and potentially devastating) than that of the entrepreneur as a bold risk taker, the flamboyant gambler who bets it all and wins. And while this popular image is often portrayed in the media, to an experienced entrepreneur, nothing could be further from the truth.

In a recent article, The Sure Thing – How Entrepreneurs Really Succeed, author Malcolm Gladwell dispels this myth, describing the successful entrepreneur not as a bold gambler but as someone who is highly risk-averse.  

Citing research from sociologists Hongwei Xu and Martin Ruef, Gladwell describes a study in which a large sample of entrepreneurs and non-entrepreneurs were asked to choose among three alternatives:

1.    A business with a potential profit of $5 million dollars with a twenty percent chance of success

2.    A business with a profit of $2 million dollars with a fifty percent chance of success

3.    A business with a $1.5 million dollar profit with an eighty percent chance of success

In this study, according to Gladwell, the entrepreneurs were most likely to choose the third and safest of the three options. After all, how many would-be entrepreneurs set out in search of the American dream, betting their 401K on a business with little or no evidence of demand for their product or service. “If you build it, they will come,” is a popular axiom that may encourage spontaneity.  However, for an aspiring entrepreneur it often leads to disaster.

Using examples such as Ted Turner and the Wall Street hedge fund manager John Paulson, Gladwell instead attributes the entrepreneur’s advantage to an ability to analyze rather than a tolerance for risk. It’s their ability to identify opportunities through careful analysis and to eliminate risk that enables them to succeed.

What’s puzzling is Gladwell’s choice to characterize successful entrepreneurs instead as “cold blooded bargainers” or “perfect predators”. While I applaud Mr. Gladwell for dispelling one myth, I’m afraid that, in doing so, he has perpetuated another.

After reading Gladwell’s article yourself, what do you think? What choice would you go with? What would you deem a success?

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