There is one longing almost as deep and imperious as the desire for food or sleep. It is the desire to be great. It is the desire to be important.
—Dale Carnegie
More than fifty years ago an article by a scientist named Sidney Dancoff appeared in a leading physics journal. Although Dancoff had worked on many projects in nuclear physics, including the building of the first atomic bomb, he had more recently turned his attention to biophysics (the intersection of biology and physical science). In his article, Sidney Dancoff proposed a formula that was both simple and profound. Although it was intended to describe biological processes at the microscopic level, the formula had obvious relevance to all areas of our lives.
It’s one of those ideas that causes you say to yourself, “Hey, why didn’t I think of that”? Dancoff’s formula, known as the principle of maximum error, can be stated as follows: Optimum development occurs when an organism makes the maximum number of mistakes consistent with survival. In other words, the more mistakes you make, the closer you become to your best possible self, provided the mistakes don’t kill you. So it would seem that nonfatal mistakes are not things to avoid. In fact, they should actually be sought out by people who want to evolve toward their full potential. The formula doesn’t say, of course, that the mistakes will be painless. It doesn’t say they won’t cost you money, or that you won’t lose sleep at night. It does say, however, that if you keep trying, you will get better. This is certainly true at the biological level (the original focus of the formula), but is perhaps also true emotionally and even spiritually. At least that’s what a leadership master would say, because leadership masters have often made a lot of mistakes in their lives. They made mistakes because, like all leaders, they embrace risk. They see risk as a basic requirement for gain; not only for their financial or material gain, but also for their growth as leaders and as human beings.
One of the most successful real estate developers in America was famous for asking a few straightforward questions whenever someone came to him with a proposal. Before anything else was even said, the developer always inquired, “How much could I lose in this deal? How badly can I get hurt? What is the ratio of risk to possible reward?” If there was no risk, the developer never needed to hear any more. He wasn’t interested because he knew, as the saying goes, that there really is no such thing as a free lunch.
If a deal offered little chance for a big payoff, it wasn’t worth his time or money. If it seemed to have low risk but the promise of significant gain, he knew there must be something wrong. In his eyes, in the real world of business, things simply don’t work that way, although people would tell him otherwise.
Asking about the risk was the best way to cut to the chase. If the developer learned he could get wiped out, his attention was immediately aroused. He saw the possibility of getting wiped out as a precondition for the possibility of a huge success. This real estate developer applied a simple principle when he interviewed prospects for executive positions in his company. As he described it, “Most people try to make themselves look good. They do that by talking about all the great successes they’ve had. So they’re quite surprised when I ask to hear about their biggest failures, and they’d better have some good ones if they expect to join our organization. If a person has never failed, it tells me they’ve never taken any risks, and that’s a bad sign. An absence of defeat also means you’ve never had to recover from anything. You’ve never had to pull yourself up off the ground and get back into the game. I don’t need people like that. We take a lot of risks around here and sometimes we get hurt. When that happens, I need executives who can lead us back from misfortune because they’ve led themselves back before.”
Lucio A. Noto, the former chairman and CEO of Mobil Corporation, is another leader who has thought a great deal about the role of risk in a successful organization. When Mobil’s merger with Exxon was announced in 1998, one of the world’s largest corporations came into being. Lou Noto had been with Mobil for more than thirty years. Many other employees had looked at their careers with the oil company as a cradle-to-grave proposition, but the merger made layoffs and early retirements unavoidable.
While he had to let almost five thousand workers go, he did not have to dismiss as many as at other large companies did during the heyday of downsizing. This counted for about 7 percent of the total workforce. In its aftermath, the CEO was concerned that the sixty-two thousand people who remained would want to play it safe to protect their jobs. That seemed like a disastrous possibility to Lou Noto, who understood the positive aspects of risk-taking. As he described it in an interview, the company was becoming totally success oriented without understanding everything that success really required. It was as if people were doing projects that cost a thousand dollars to net a fifty-dollar return.
True, there was minimal risk, but sometimes even low-risk endeavors don’t work out. So where was the logic? What was needed were thousand-dollar projects that had at least a reasonable chance of making ten thousand or even a hundred thousand. And if there was also a chance of failure, Mobil should be eager to pay that price.
If you expect people to develop into leaders, you can’t tell them they’ll be fired if they don’t hit a home run every time they swing the bat. If you want to become a leadership master, you’ve got to get used to swinging that bat yourself and you’ve got to love swinging for the fences.
As the late billionaire John Paul Getty once wrote, there are one hundred people seeking security for every person willing to risk his fortune. “Here’s how I look at it,” said a successful screenwriter in Los Angeles. “For me, success means access to opportunity. If I can get to a point where I’ve got a real chance to close a big sale, I think I’ve already won. Now I’m able to take my shot, and if it doesn’t go in the basket, maybe the next one will. But I never beat myself up for missing or for taking the risk of putting myself on the line.”
He pointed to a shelf of unproduced screenplays. “Each one of those took me at least six months to write. Each one represents a big investment in time and effort, a risk that didn’t pay off financially because none of them sold. But I think of them as successes because they gave me access to opportunity. They opened it up for the ones that did sell, and the money I got for them more than justifies the expense of the others.”
This is the kind of proactive approach to risk that a leadership master needs to develop. When you’re faced with a risky situation, don’t feel you have to be a daredevil. If there’s a probable chance of success, however, train yourself to focus on that outcome instead of the chance for ruin. Too many people spend far too much time worrying about catastrophes that never happen. This is a waste of time and energy. As a French philosopher once expressed it, “My life has been full of terrible misfortunes, most of which never happened.”
So right now ask yourself a very simple question: “How willing am I to tolerate risk?” The question is not how much risk you are willing to tolerate, but are you willing to tolerate any risk at all? Unfortunately, for many people the answer seems to be none. In his book entitled Empires of the Mind, author Denis Waitley makes an interesting point about the psychology of risk assessment, and about the risks of not taking risks. Waitley refers to a tribe in the Amazon region of South America who for many years had been afflicted by a rare disease. Eventually a group of physicians became friendly with the tribesmen and discovered the source of their problem. An insect that infested the walls of their dwellings caused the disease.
At that point there were three clear choices open to the members of this Amazon tribe. They could allow the doctors to spray their huts with a pesticide. They could also build new huts in a different location where the insect was not found, or they could choose to do nothing. It may seem strange to us that the last alternative is the one they chose, but as Waitley points out, for many people this should seem like a perfectly understandable response. After all, both the pesticide and moving to new homes involved a confrontation with the unknown. Both also involved a certain amount of risk. The pesticide might prove to be harmful in some way, just as there might be unforeseen problems in any new location the tribe might choose for themselves.
So they decided to stay with the predictable amount of suffering and early death they had grown used to. The risk of danger seemed worse than the danger already present. How different is this from things we see every day in our own environment? How different is this, for example, from people who stay in careers that provide little more than the illusion of security, or who live all their lives within a few blocks of where they grew up. They remain there not because they like it, but because anywhere else would be different.
That’s one end of the risk tolerance spectrum. It’s zero tolerance for risks. At the other end of that spectrum are people who not only tolerate risk, but who hardly even notice it at all. It may seem surprising that this category includes many very successful people, especially entrepreneurs. These individuals simply don’t see their ideas as liable to failure.
Studies of wealthy entrepreneurs show that intuition is their guide. Business schools teach sophisticated mathematical approaches to risk analysis, but entrepreneurs don’t use them. Those methods are for bankers and accountants. You may use these methods yourself. You can be a leader, and you can choose an acceptable level of risk. You can decide to stay away from the roller-coaster ride that many entrepreneurs have chosen. If, however, you feel uncomfortable with any level of risk whatsoever, if the status quo seems so precious that you dare not tamper with it, you must ask yourself whether you’re really committed to achieving leadership mastery. After all, it’s misguided to think that if you keep doing what you’ve always done, you’ll get anything different from what you’ve always gotten. So you may need to decide to either lower your expectations, or raise your tolerance for risk at least a couple of notches.
1. To get comfortable with taking risks, you need to know where you stand. On a scale from one to ten, how open are you to taking risks (one being not very open, and ten being extremely open and willing)?
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
| Not open | Extremely open | ||||||||
2. To continue investigating how much risk you are willing to take, it helps to look at your experiences with risk in the past. What are some of the biggest risks you’ve taken in your personal and professional life? How did risk affect you, both at the time and when you look back on the situation from the perspective of months or years? Write your thoughts on three different risky situations that you have experienced.
3. Take some time to review your current life. Where might you be willing to take some risks? These risks could involve investigating a career change (if it’s something you have always wanted to do), relationship opportunities, additional hobbies, travel, additional sources of income, entrepreneurial ventures, or any other area of your life in which you’ve considered taking action, but have perhaps feared taking risks. List at least three items that you will take action on. Be as specific as possible, and set dates to further motivate yourself and hold yourself accountable.