I’ll never forget the day I dropped out of university to start my first business.
Not because I’m proud of it…
But because it was probably one of the most reckless (and stupid) risks I’ve ever taken.
When I reflect on why I did this, I think it was because I thought that the more pressure I put on myself, the more likely I would be to succeed.
My logic was that if I dropped out, it would give me a massive incentive to make the business work.
However, that business didn’t succeed.
It was an online farmers market that helped people buy food directly from their local farmers.
It lasted nine months, and despite surface level appearances, it was one of the most stressful periods of my life.
Not only that, when the business went down, my self-esteem went down with it, and I was ashamed for quite some time after.
Since that experience, I’ve changed how I think about taking risks, and in this post I’m going to cover three of the best approaches I’ve found for smarter risk taking – so you don’t end up in the same situation I found myself in.
#1 – The Baby Steps Approach
‘The Journey of a Thousand Miles Begins with a Single Step.’Lao Tzu
In 1994, researchers followed 5,000 entrepreneurs to compare the success rate of those who quit their job and jumped straight into full time entrepreneurship, against those who started their company on the side of what they were already doing.
The results were surprising.
Entrepreneurs who started a company on the side were 33 per cent more likely to succeed than those who quit their jobs and went ‘all in’.
In other words, the myth that I bought into, (that putting more pressure on myself, jumping in at the deep end, and putting my eggs all in one basket), would increase my chances of success, is not only wrong, it’s scientifically inaccurate.
When you put yourself under pressure, you also put yourself under stress – and it’s hard to be creative (or have any fun) if you’re worrying all the time.
So, when I started my current company, The Weekend University, I decided to take a different approach.
Before moving to London, I applied for a job as a receptionist at a Hostel in London.
By working in the Hostel, it meant I could live in London rent free, have a regular income, and build my company in my spare time.
Talk about taking the pressure off…
And this leads me to my first big learning point about taking risks:
You’re more likely to succeed at your passion project; whether it’s starting a business, writing a book, or freelancing, if you do it on the side when you begin.
You can take what writer Jeff Goins refers to as ‘The Baby Steps Approach’.
Simply put, this involves investing your spare time in your passion project, and letting it build up, before you make any major leaps.
In his book: ‘Real Artists Don’t Starve’, Goins tells the story of how John Grisham became the famous novelist that he is today. When he was getting started, he was a full-time lawyer and new father, so he didn’t have a lot of time on his hands.
However, this didn’t stop him.
Grisham would get up early every morning, go to his office and write one page per day of his first novel. That was goal – one page per day for 365 days.
Eventually this habit led to the manuscript for his first book, and ultimately to becoming the prolific writer that he is today.
#2 – Protect the Downside
‘We take a lot of calculated risk, but we make sure that no one risk is going to topple everything. Protecting the downside is critical.’Richard Branson
Every risk we take can either lead to upside (rewards) or downside (negative consequences).
The very nature of risk is that uncertainty is built into its very structure.
In other words, you can’t have risk without uncertainty; they’re two sides of the same coin.
It’s impossible to predict in advance which way your risk is going to go; whether it’ll lead to rewards (upside) or to negative consequences (downside).
And the more uncertain you are about the downside, the more anxiety you’ll feel.
In other words, if you’re not clear about specifically what could go wrong, this leads to excessive and compulsive worrying.
If you were writing this as an equation, it would be:
Vague + Unclear Downside = Anxiety
And often it is this anxiety that prevents us from taking the risks we need to move forward in the world.
So, is there a way around this?
It turns out there is…
It’s called protecting the downside, and it’s a core practice of some of the best risk takers on the planet.
One of the best examples of protecting the downside in action is the story of how Virgin Airways got started.
At the time, Virgin was a record company, and Richard Branson was toying with the idea of starting his own airline.
How did he go about it?
When he was negotiating for his first plane with Boeing, Branson’s main condition was that he could sell the plane back to them after 12 months if things didn’t work out.
In the worst-case scenario, Virgin could only lose the difference between the price the plane was bought for, and the price Boeing would buy it back for, a year later.
This meant that Virgin could see if the airline would take off (metaphorically speaking), at the risk of losing very little; not even the cost of one plane.
The downside was known and limited, and the upside was potentially enormous, which gave Branson the psychological freedom he needed to invest in his first plane.
So how can you apply this in your own life?
If you have anxiety about a risk you’re thinking about taking, it can help to get crystal clear on the downside, and then take whatever steps you can to limit it.
- What is the worst-case scenario if things don’t work out?
(Think in terms of money, time, reputation, etc. The more detailed you can be here, the better.)
2. If the worst -case scenario does happen, what specific steps can you take to recover and get you back to your current state?
For example, let’s say you’re thinking about leaving university to start your first business as I had been. You could negotiate a ‘leave of absence’ for a year, which would enable you to return in 12 months, if the project doesn’t work out.
Most negative outcomes are reversible.
The trick is to identify how you will do this before you take the risk.
Because if you’re clear on exactly what could go wrong, and have a clear path for recovery, it reduces your anxiety around the risk, and gives you the psychological freedom you need to move forward.
#3 – Stack the Deck in Your Favour
“I am not discouraged because every wrong attempt discarded is another step forward.”Thomas Edison
The third thing you can do to take smarter risks is to do what Tim Ferriss refers to as ‘stacking the deck’ in your favour.
In a nutshell, this involves setting up the situation in advance, so that even if your creative project or business is a complete failure by conventional standards (e.g. making money), you’ll still benefit in the long run.
When Ferriss is choosing which projects to focus on, he prioritises two things:
This means that even if the project doesn’t work out as you had originally hoped, you’ll still learn valuable skills and improve your network in the process.
If you take this approach, you can’t really lose.
Each of your failures will be ‘micro-failures’ that will strengthen you and increase your chances of success in the long run.
So, when you’re thinking about taking a risk or choosing your next creative project to focus on, it can help to ask yourself these questions:
1.) What skills can I develop in the process of doing this?
2.) What relationships can I build?
By asking yourself these questions up front, you’re guaranteeing that you’ll come out the other side stronger, more skilled and better connected than you were before you began – regardless of the outcome.
To move forward in this world, you need to take risks.
Taking risks that take us beyond our current zone of comfort are how we grow and realise more of our potential.
However, there’s two ways to go about taking them; a smart way, and a dumb way.
The risk I took when I left university to start my first business was a dumb one, and it landed me in a bad situation that took me a long time to recover from.
If you want to avoid this in your own life, and start taking risks like a pro, the following three approaches can really help:
- Take the Baby Steps Approach; take the pressure off and start your passion project on the side.
- Protect the downside; get clear on the worst-case scenario, and figure out your recovery plan for before you begin.
- Stack the deck in your favour; priorities learning new skills and building relationships, so that even if you fail by conventional standards, you’re still setting yourself up for success in the long run.