In this month’s New Yorker, Malcolm Gladwell has a piece entitled “The Sure Thing” (digital subscription required) about entrepreneurs and risk. Gladwell builds on a recent book by a couple French scholars called “From Predators to Risk: Exposing the Myth of the Business Hero” (only in France, how un-Ayn Rand of them).
According to Gladwell, great businessmen are more Predator than Hero. The word “predator” is repeated ad nausem in the article. Given that this is not a word most people have positive associations with, we can assume that the author is not trying to promote entrepreneurs.
Predators are defined as being more analytical, and less so “hero’s” that take gigantic risks with huge potential upsides. He cites several real world stories, including:
- Ted Turner inherited the largest outdoor-advertising firm in the South, and leveraged that to build his first cable channel on UHF, minimizing the risk of the purchase
- John Paulson was engaging in very low-risk trades that led to one of the largest paydays ($4 billion) in Wall Street history. He simply looked at the numbers, saw a housing bubble, and bought assets that would appreciate in value once that bubble burst
I think what is under debate here is the cultural notion of the Business Hero; great self-made men that scale unimaginable heights to make billions. This argument attempts to take the romanticism out of business. There’s nothing revolutionary about the fact that great businesses are build based on calculated risks. Big risk does not mean good business.
Perhaps the term Business Hero is actually a metaphor for Capitalism, and this perspective a shot against the individualism of Capitalism. Fair enough, because any capitalist who thought that Business was not about calculated risks won’t find themselves getting very far.
It’s a worthy read in that it’s easy to get carried away about taking big risks with huge upside. Sometimes it’s important to quantify a risk to ensure that it is a smart, calculated risk.