I am a second-generation startup founder. No, I did not grow up in Silicon Valley and no, you have never heard of my parents or the business they started.
My parents are founders of a farm, and though their venture could not be more different from the technology startups that dominate the media today (including my own), their endeavors offer a tremendous lesson on the assessment of risk.
My parents’ business was born out of desperation. My father was laid off from his blue-collar job in 1983 and we lived in a rural area of Arkansas where what little industry had ever been was continually shrinking. I suppose we could have moved in order for my father to find work, but the land we lived on had been owned by my family since not longer after it was acquired by the United States as part of Louisiana Purchase, and many generations of attachment to soil is hard to sever.
We were about to lose everything – home, cars, land, and pride – when Tyson, the global poultry behemoth, announced an expansion of production in our area and were recruiting “growers” to start new farms. My mother feared the debt the new venture would require. My father, on the other hand, had a different take, “If we are going to lose everything to the bank anyway, we might as well let them take the farm, too.” Though he didn’t know it, he was exercising his “antifragility,” as Nassim Nicholas Taleb would call it. With little to lose, he stood to gain tremendously from the severity of his current situation. And so they built the farm.
The farm was a success and the loans my mother feared were repaid. They sold the business a few years back for more money than they could spend in what remains of their lives. Now they go fishing any time the sun shines – not a bad retirement for a twosome who almost lost it all.
Many people look at risk as a simple probability of success or failure. But my father’s calculus was far more nuanced in actually comparing the relative risk of two scenarios. For illustration, let’s assume there was only a 5% chance of my family not losing everything in their current situation, but that chance was would increase to 50% if they built the farm (guaranteed contracts were awarded prior to construction so their odds were better than many upstarts today, again including my own). Though a 50/50 chance of losing everything was indeed risky, they were actually 10 times more likely to keep their land, their home, and their pride, by taking the risk. There was nowhere to go but up.
That same analysis led me to start a company 30 years later. I was far from Arkansas, and I didn’t become a chicken farmer. After all, I was living in New York City and while urban chicken coups are intriguing, they don’t exactly support a family in Manhattan. In fact, I was struggling to provide for my family of four here even with a post-MBA job. Sure, we could have moved. But we loved the city and all its glories and grit. We wanted to stay.
I had an idea for a startup, was able to generate interest from customers and investors, and found a fantastic partner to co-found the business with me. With no savings and three mouths to feed other than my own, I left my job to give my idea a go. Yes, I know that only roughly 12% of first-time founders succeed (no guaranteed contracts lowered my chances from my parents’ odds so many years ago), but that was not the risk assessment that powered my decision.
Though my situation was not as dire as that of my parents, the calculus for my decision was the same. There was a 5% chance we could stay in New York if I remained in my job and continued the professional path it represented. If my chance of success as a founder was 12%, I was more than twice as likely to be able to support my family in the city if I took the risk. Just as my father before me, I exercised my own version antifragility.
And so was born SocialQ. A year and a half later, we’re still here in New York. The business is breaking even and we have a growing list of customers. There is still some uncertainty in our future, but less so now than when I worked for someone else. To me, that’s success.
As we all face personal and professional decisions, we must not focus too intently on the chance of success or failure in any given endeavor. Rather, compare the probabilities of achieving your goals (be they financial, situational, or experiential) in each scenario. You may be surprised how comfortable you quickly get with the idea of risk, and the many adventures it may lead you on.