The Utter STUPIDITY of "Risking it All"

Everyone loves to glamorize the Founder who risked it all — until they are the Founder who lost it all.

Recently I was watching the History Channel series "The Toys that Made Us" with my kids, where they documented the inventors of toys from Barbie Dolls to Trivial Pursuit. Within the documentary are conveniently scripted scenes where actors dramatize key moments where the Founders "risked everything" to bet on their big dream, which of course, went on to become a huge hit.

When my daughter turned to me and asked if that's what it's really like - to risk everything to become successful — I turned to her and said, "Yes, if you're lazy." I said "lazy" because I didn't want to say "stupid" but when she's an adult, I'll be sure to add that part in as well! But regardless, I wanted her to know that anyone can take a risk — smart entrepreneurs do it with an even better backup plan attached.

Taking Lazy Risks

When I hear about Founders taking a risk, I always ask about their backup plan. Sadly, I rarely hear about one. Personally, I find that approach to be lazy at best and irresponsible at worst. Our jobs as Founders, and really as the ultimate strategists, are to not only make big bets but also build strategies around multiple outcomes and, if we're doing our jobs right, a plan to survive bad bets.

In 2015, we purchased a company called Zirtual.com, a virtual assistant business with over 450 full-time employees that was due to go out of business within hours in a forced shutdown. We purchased the business, practically sight unseen, in just a few hours and with no advance warning. That was a huge risk, but the plan I was working on when I made the offer wasn't about the upside; it was all about the downside.

We focused exclusively on the downside risks — everyone quitting, clients jumping ship, and some major legal issues we weren't aware of. That allowed us to calibrate all of our efforts to playing defense in order to be around long enough to go on the offense and scale that business. That backup plan is what kept us around long enough to come back and build a great company in Zirtual.

Risk Enough, but with a Backup Plan

The key to risk is NOT risking everything because risking everything implies that we have nothing left if things go south. Think of it like being at the Blackjack table. If we bet everything and lose, we can never get back in the game. But if we bet half of everything and lose, we still have enough chips on the table to be around long enough to get it back.

That's what this startup game is all about — being around long enough to ride out the bad bets until the good bets start to land. Where we make our mistakes is thinking that this is an "all or nothing" business, which makes for a great movie, but not such a great reality TV show.

There are all kinds of ways to "keep some chips on the table," from staying at our current job longer to hiring the next person as a contractor before they are full-time. Statistically, we're going to make way more bad bets than good ones, so we've got to have enough self-awareness to protect ourselves from the inevitable bad bets we're going to make.

Bet on Success, but Plan for Failure

In the history of startups, I've never heard of a company that went bankrupt because its bets just paid off so well. Every time I've had a big bet that paid off, it was always easy to plan around that. We may have to hire a ton of people, find additional office space, or borrow some capital - but all of that is incredibly achievable when things are going well. The worst thing that could happen is that we don't grow as fast as the opportunity provides.

But damn — the other side of that? The part where the bet blows up and we're trying to lay off people, negotiate out of our office lease, and beg for bailouts — now that's what I'm worried about having a plan for. Those are the things that matter.

"Planning for Failure" isn’t an admission of a bad bet — it's the foundation of being able to make a good bet. We can and should take real risks, but do so with the understanding that if those risks fail, it doesn't stop us. It might slow us down, but it keeps us in the game and fighting until it's time to push some chips back in again.

Oh, and remember — they only make movies about the Founders who risked it all and won. The real stories tend to be the opposite of that!

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