Malcolm Gladwell's latest New Yorker article, "The Sure Thing," follows his trademark formula: find a truism and turn it on its head. In this case, the truism is "entrepreneurs are risk-takers." American culture lionizes the entrepreneur for taking risks that others wouldn't take, by staking huge amounts of money, time, and energy in something totally new. Gladwell finds, though, that extravagant risk is something the most successful entrepreneurs scrupulously avoid. He cites several famous entrepreneurs – Ted Turner (Turner Broadcasting), Sam Walton (Wal-mart), and Ingvar Kamprad (IKEA), among others – who distinguished themselves by their superior insight and exhaustive research, and not their cahones. Hedge-fund manager John Paulson, who made billions of dollars betting against the U.S. housing bubble, may seem like a high-stakes gambler, but in fact he did months of research before he would so much as touch a credit default swap. The successful entrepreneurs took every opportunity to avoid risk, by shifting it onto outside investors, or leaning on cash reserves within a family or a family business, or simply making astute choices of business deals where they couldn't lose.
I can say that Gladwell's thesis holds up well in my own experience. I had the distinct privilege for working for Augie Turak during the early years of his startup Raleigh Group International (RGI) which sold and marketed software develop tools. His motto of entrepreneurship might have been: "Live to fight another day." "Business is very simple," he said. "A successful business has more money coming in than going out. All you have to do is remain solvent, one day after the next, until you find your niche." Turak started his venture with $10,000 and never sought outside loans. He was ruthless about controlling costs. For the first two years he didn't draw a salary. The employees took turns cleaning the office instead of hiring a cleaning service. He shunned most paid advertising, which was expensive and of questionable worth, and instead mastered guerrilla marketing tactics – direct mail to lists he traded for, email subscriptions, and all the editorial coverage he could squeeze from the trade magazines. All his sales reps were paid on straight commission, so he never had to worry about unprofitable employees dragging the company down. When he finally found a niche with a promising future – bug-tracking systems – he found a silent partner to front most of the money for the project, and found an enormous marketing partner – Microsoft – to piggy-back on for the marketing. When he finally sold the business to another software company, he held most of the equity and profited handsomely . . . because he had avoided financial risk rather than taking it.
Gladwell pointed out that entrepreneurs were willing to take social risks, even though they avoid financial ones. That fits Turak to a T. He was a master of telephone sales, and telephone sales reps risk social rejection on a minute-by-minute basis. He taught his sales force to be aggressive, to take risks, and most of all to persevere in the face of rejection and failure. He was famous for making over-the-top, impassioned sales pitches, doing things others would never dream of doing to get the sale. Once, he was pitching a quiet Japanese prospect who told him: "Prease, understand – I Japanese. We vely conservative and careful." "Conservative?" Turak bellowed. "The heck you say. What about the samurai? BONZAI! BONZAI!" Turak didn't get the credit card on that call, but everyone in the sales pit knew he had pulled out all the stops. And then, later that day, he got a call back from the "cautious" Japanese prospect: "You . . . vely good saresman. I buy."
Gladwell is only demonstrating what most performers already know: through discipline, training, and preparation, you can take something that looks dangerous and risky (like, say, a triple somersault on the trapeze, or investing billions of dollars) and make it an everyday occurrence.
