Back in the 1980’s, taxi drivers in the city of Munich, Germany took part in an experiment. The design of the experiment was to test a theory proposed by Gerald J.S. Wilde – professor at Queen’s University in Canada. In his theory, Wilde proposed the concept of risk homeostasis. As humans, we all have a certain amount of risk we are comfortable handling. This wasn’t new. What Wilde introduced, however, was this level of risk was dependent on the amount of risk we took on in other areas of our life. Our attitude towards risk wasn’t just a personality trait. It’s a balancing act. When people take a big risk in one area of their life, they typically have another area where they feel more safe. Less risk in a certain area alleviates more risk in another.
To test this, half of the taxi drivers from Munich were equipped with an anti-lock braking system (ABS). The system was designed to increase safety in the vehicle so more accidents could be prevented. The test ran for three years. What researchers found was alarming. While ABS was designed to increase driving safety, it very much did the opposite. Taxi cars with ABS made sharper turns in curves, stayed in their lane less, followed cars more closely, made poor judgement in changing lanes, and created more traffic conflicts (taking swift action to avoid a collision). They also drove faster and had more accidents in slippery road conditions.
When we apply Wilde’s theory of risk homeostasis, this starts to make sense. The ABS created a safety net for drivers. It alleviated risk by assisting in braking. This unconsciously altered driving style. Since drivers felt more comfortable with the added safety feature, they took on riskier behaviors in other aspects of their driving. It balanced out their risk portfolio.
Previous logic makes us think risk is an inherent personality trait. Wilde’s theory proposes the opposite. The decisions we make to alleviate guilt are not independent of context. They are dependent on context. This is a critical distinction.
It’s also why we need to rethink the idea of “burning the ships.”
In his best-selling book Originals, Adam Grant talked about something that is contrary to what most of us think about entrepreneurs. Our intuitive understanding of entrepreneurs is that they are risk takers. What Grant argues, however, is they are the opposite. In the words of Linda Rottenberg – cofounder and CEO of Endeavor: “The best entrepreneurs are not risk maximizers. They take the risk out of risk taking.”
Our history is littered with examples of successful entrepreneurs that didn’t quite “burn the ships.” Henry Ford was a chief engineer for Thomas Edison when he started to come up with ideas for building a car. He continued to work for the company two years after he built a carburetor. After earning a patent for it, he continued to work another year at Edison. Bill Gates was a sophomore at Harvard when he sold his new software program. He didn’t leave school until a year after. Even then, Gates didn’t initially drop out of Harvard. He took a leave of absence, formally approved by the university, and was bankrolled by his parents.
When Malcolm Gladwell started writing his first book The Tipping Point, he was working as a journalist for the New Yorker. This allowed him to write on the side by alleviating issues of finance. When asked about risk taking and entrepreneurship, Gladwell said, “Many entrepreneurs take plenty of risks, but those are generally the failed entrepreneurs, not the success stories.”
This, in essence, is what Wilde proposed back in 1982. It’s what the Munich taxi-driver experiment confirmed. When we evaluate decision making and risk management, we cannot just look at decisions in a vacuum. We need to understand the context behind them. It’s a lot easier to make a career jump when money isn’t an issue. It’s a lot tougher when you barely have cash for a full tank of gas.
This is why I have an issue with the idea of “burning the ships.” I’ll admit, I’ve changed my mind on this one. I remember watching Shark Tank episodes where Mark Cuban wouldn’t offer a deal to an entrepreneur because they had a side hustle. He wanted them to commit to their new idea full-time. He didn’t want them to alleviate risk. He wanted them to take on more of it. While I understand where he’s coming from, I don’t think this is the best message for everyone.
I’ve been fortunate to build a relationship with Brett Bartholomew, founder of the Art of Coaching. On his podcast episode with Mike Boyle, owner of Mike Boyle Strength & Conditioning, he said a quote that’s resonated with me over the past several years. He said: “At some point, you are going to have to assess your risk. What is something uncommon I can do today that will give me leverage in the future?”
I think it’s time we start evaluating leverage using breadth, not just depth.
While we all are going to have to face risk at some point in our professional careers, I don’t think we should just blindly accept it as part of the fine print. We need to be strategic about it. Find a side hustle. Develop a niche. Take a short term job that allows you to do what you want on the side. Don’t quit your job until you can support yourself. We’re going to make better decisions when we have a safety net that creates sustainability. It’s tough to think rationally when we don’t.
As coaches, we’re all going to face risk. We’re going to have to make difficult decisions. In these decisions, we’re going to have to make strategic sacrifices. If you want to take on more risk, alleviate risk in as many other areas of your life as possible. Sometimes that next opportunity is going to require a big leap of faith. It’s going to be uncomfortable. There’s no way around that. What we can do, however, is set ourselves up so we can take that risk and be okay if it doesn’t work out. We’re never going to bat 1.000 on the risks we take. Prepare like you’re going to hit .120. Be surprised when you hit .350.
If you want to maximize your risk portfolio, you need to learn how to first minimize it. When the right door opens, you need to be comfortable enough to walk through it. This starts well before you ever have the chance to.
It also won’t be open for long.