Are Entrepreneurs Essentially Gamblers - Research Paper Example

Are Entrepreneurs Essentially Gamblers? The general idea in people’s minds seems to be that most entrepreneurs are nothing but gamblers and risk takers who are willing to stake their fortune and reputation in trying to prove their business acumen. Indeed, until a few decades ago it may have been an arguable point. However, with the current global job situation and the financial melt-down in most economically advanced nations, the term “risk” needs to be looked at from a different perspective. Who is at risk of losing out on earning opportunities and be on unstable ground- a multinational corporation employee or an entrepreneur? With people falling like nine-pins in the recent economic slowdown most salaried employees were at risk of losing their jobs at any given moment. Not because they stopped being good workers but because the companies they worked for were downsizing to remain afloat in the turbulent financial waters. The once secure salaried jobs looked very vulnerable and left hundreds of people jobless almost overnight. In contrast self-employed people and entrepreneurs have relatively been more solidly placed. The slowdown may have impacted their rate of growth or percentage of profit but by and large they have managed to hang in there and made a comeback after the financial crisis was over. Why an entrepreneurial career is considered more prone to risk and akin to gambling? How do we define risk? Risk usually involves a situation where we have little or no control over our futures and stand to lose financially because a lack of visibility into the future. Having no control over any situation can be daunting and to expose oneself to it may seem like a foolhardy thing to do, but if one were to remember the adage nothing ventured nothing gained, we will begin to understand the pioneering and enterprising spirit of an entrepreneur. A lack of choices and or limited choices may be another aspect of being exposed to risk because lack of choices also leads to being in a situation over which one has no control. If one were to interpret risk along these lines then there is more risk in working for others than there is in working for oneself as all entrepreneurial ventures must necessarily be well planned and organized. On the other hand in a salaried or more “secure” job situation one is hardly ever in a position to foresee where one’s efforts are headed and unless one is a top management executive the choices are limited to following the company’s policies and procedures. On the positive side, in a salaried job, one’s salary is more or less secure at the end of every month( unless one has really blown a task and flouted company norms) and one does not have to worry about how and from where the next week’s wages will come from. Having said that, it is important to look at the possible risks involved in embarking upon a career as an entrepreneur and understand the psychology of these creative people who are willing to risk a lot in realizing their innovative ideas and dreams. The basis of the myth that “entrepreneurs are essentially gamblers” is founded on an erroneous belief that risk can only have negative impact and will always outweigh the positive potential of an enterprise. This may be a flawed logic as has been proved by scores of successful entrepreneurs like Richard Branson, Bill Gates, Michael Dell, Oprah Winfrey and many more. This mistaken fear of failure can result in a person not being able to use available opportunities to realize the potential of his/her innovative ideas and creativity and the world may never see another genius like John Rockefeller or Lee Iacocca. The argument that entrepreneurship entails an enormous amount of risk taking has been researched by economists and psychologists in an attempt to understand the true nature of the prejudice against entrepreneurship. Jeff Cornwall (2003), in his article discusses the two types of risks entrepreneurs face, that of: Sinking the Boat Risk, which refers to the idea that the new enterprise or the “boat” may capsize and sink under the weight of unforeseen risks. The business enterprise may be doomed to failure as the entrepreneur may not be able to measure up to the risks involved in making the business thrive and fail to make instant profits. Too much caution can, however, become the cause of failure as has been interpreted by Cornwall. Statistics show that more than 80 percent business ventures fail at start-up due to improper planning and training for the business rather than succumbing to business risks. Avoiding risks cannot be the only solution to failing in establishing one’s enterprise. What is equally, if not more, important is that one needs to do a lot of prior research, planning and training before launching one’s project. The fear of failure and of facing risks will be reduced when one is properly geared to start a new venture. The germ of a new concept along with rigorous planning, research, proper training and perseverance is the prescription for the success of one’s business venture. The notion that entrepreneurs are gamblers ignores another important facet of risk taking while embarking on a new business venture. The other concept of “missing the boat” describes what economists refer to as opportunity cost or the price an entrepreneur has to pay for not utilizing opportunities available due to risk avoidance. This proves that there is a risk in not acting or pursuing openings and potential opportunities just as much as taking risks and failing. Cornwall states that people who succumb to fear of risk and let go of good opportunities are more prone to failure as they do themselves injustice. Such people have the courage to take the first step in setting up their project but get cold feet and prove to be imprudent by not following up by taking the next steps out of fear of failure. These people then are basically wasting the resources at their disposal and therefore, are restricting their own chances of success by being over cautious. That entrepreneurs are portrayed as risk takers is partly true because they risk their own financial security by investing their money in their own project (Longenecker 2005). They run the risk of jeopardizing their careers by giving up lucrative jobs and putting their faith in their own creativity. They run the risk of causing stress to their familial ties by not being able to give them the time and attention they deserve as most of their effort and time goes in nurturing their fledgling project. Hence, entrepreneurs do take risks but these risks are not extreme and they know fairly well what the outcomes will be and are in partial if not total control of the situation. Their commitment and passion for their idea drives them to scale difficulties and emerge successful. The comparison of entrepreneurs to gamblers is not really fair as gamblers leave most of their winnings to chance while entrepreneurs though have to depend on fate at times are in control of the direction their projects take. Works Cited Longenecker, J.G, Moore, C.W. et al. Small business management. Mason: South-Western, Thomson Corporation. 2006. Print. Read More