Risk: Entrepreneur

If you listen to or read material about startups and entrepreneurialism, then you’ve probably heard over and over that you have to take risk! Be a risk taker! Risk! Live out of your car! Max out all of your credit cards! So let’s look at that a little bit shall we.

What is risk?

a situation involving exposure to danger.

What is “Risk Tolerance”

The degree of variability in investment returns that an individual is willing to withstand. Risk tolerance is an important component in investing. An individual should have a realistic understanding of his or her ability and willingness to stomach large swings in the value of his or her investments. Investors who take on too much risk may panic and sell at the wrong time.

That definition of “Risk Tolerance” comes from Investopedia. I think that’s somewhat relevant in the case of entrepreneurialism because most of what we try to figure out deals with money at some point or another.

So Investopedia also has this article about determining your risk tolerance. One of the most important takeaways I think here that a lot of people miss from most of the startup material that’s put out there, is that not everyone has the same risk tolerance.

Right now, I have low risk tolerance. It’s important to me to have security. I want to know that I can make my house payment, fix my car when it breaks, pay my phone bill and don’t forget internet!  There are all kinds of risks that people may not be willing to take for various reasons. There may be consequences to taking on less risk, probably something to do with the rate of growth that you can obtain for your ideas.  I think a lot of the time a person will be ok making that trade off.  It doesn’t mean that you can’t increase your risk tolerance later on too.

When you’re reading those articles or listening to speakers or podcasts that keep saying that you need to take more risk, they might have a different objective or end goal than you do. We can’t all make $1billion dollar businesses! If you do want too that’s great and don’t stop until you make it! If you want to create a $100,000 business the same is true! Don’t stop until you make it! But you have the power to decide how much risk you’re willing to take on.

Another thing that I have started to notice is that these people that yell from the mountain tops to take huge risks, also seem to have a different definition of risk.

Richard Branson points this out nicely in a blog post entitled “The Art of Calculated Risk

Always protect the downside. I think it should be a guideline for every entrepreneur — or anyone involved in business ventures. – Richard Branson

In the end the kind of risk and the amount of it that you take on is up to you. Your risk tolerance can change over time. If you have an idea that you’re passionate about don’t think that in order to see it through you would have lose your house or ruin your credit score to test it out. Go out there and do stuff!

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Risk: Entrepreneur

Mental Priming and Failure

Writing again!

It’s been so incredibly long since I’ve written a blog post. Probably about  2 and a half years in fact.  I’ve been listening to a lot of podcasts lately about startups and entrepreneurialism and so many of the successful people that get interviewed say that they blog quite often.  Thinking back to when I wrote fairly consistently, those times were when I felt the most engaged with whatever it was that I was doing. Even outside of the blog and other projects I was working on, I felt engaged.

I think there might be some kind of discipline that’s developed in writing blog posts.  Sometimes, a blog post helps you asses a situation or an event that happened. Similarly, perhaps, to writing a personal journal. So it’s good to fire up the blog again!

So that said, the title of this post….what am I talking about?

The Setup

I’ve been reading this book “Thinking Fast and Slow” by Daniel Kahneman, it’s pretty heavy on the psychology speak, he spends a lot of time talking about studies that have been done and papers that have been published. But even with all the psychobable goes on in the book, he’s able to make it really easy to understand and super easy to read in my opinion.

There’s a concept called “Mental Priming” in chapter 4 that basically says that if you’re thinking about something forced to think something then that can have other mental and even physical affects as an outcome of being exposed to those thoughts. This might seem like a “duh” moment to some people reading this but here’s where it got interesting for me.

Kahneman talks about an experiment where college students were given 5 words and then told to make a 4 word sentence out of the given words. In one case they used words that we associate with the elderly, like “Florida”, “Grey”, “Wrinkles” etc..

The next part of the experiment was to have the students walk down the hallway to another room where they were told would be another task. The sneaky part was that they were timing how long it took the students to walk from one room to the other after mentally working on a problem involving words associated with the elderly. They found that the students walked slower down the hall after working with the words associated with the elderly than with words associated with speed or something else that may have a normal physical pace.

Conclusion and TL;DR;

For me this was an eye opener, I don’t think we realize how sensitive our minds are to our environment. We can also train our minds and it might physically affect our environment and our day to day interactions.  I made a new years resolution to stop saying “I feel old” and “I’m tired” all the time in order to train myself to stay positive. Mentally priming yourself with a negative outlook could have much more far reaching effects on your life and relationships than you realize consciously and unconsciously.

I hope this helped broaden your frame of mind on how our thoughts change our actions. I highly recommend this book! Each chapter has made me excited and helped me understand how our minds work. I would almost say that you can figure out a lot of lifehacks in paying attention to what Kahneman has to say.

Mental Priming and Failure