Who takes risks?
One of my readers sent me a link to this blogpost by James Wimberley, which talks intelligently about safety nets and their secondary effects (it also has a nifty link to the history of bankruptcy laws in the U.S.).
I want to hone in on one aspect he describes, namely how, in spite of people in the U.S. considering themselves entrepreneurial, we are not so much. His theory is that it’s because of a lack of safety net: people are worried about losing their health insurance so they don’t leave the safety of their job. Here’s Wimberley’s chart of entry density, defined as the rate of registration of new limited liability companies per thousand adults of working age, by country:
The question of who takes risks is interesting to me, and made me think about my experiences in my various jobs. In fact this dovetails quite well with another subject I want to post on soon, namely who learns from mistakes; I have a theory that people who don’t take risks also don’t learn from mistakes well. But back to risktakers.
It kind of goes without saying that people in academics are not risk-taking entrepreneurs, but I’ll say it anyway – they aren’t. In fact it was one reason I wanted out- I’m much more turned on by risks than the people I met inside academics. In particular I don’t want to have the same job with the same conditions for the rest of my life, guaranteed. I want adventure and variation and the excitement of not knowing what’s next. When I went to a hedge fund I thought I would find my peeps.
However, most of the people I worked with at D.E. Shaw were really not risk takers at all, in spite of the finance cowboy image that they are so proud of. In fact, these were deeply risk averse people who wanted total control over their and their children’s destinies.
Moreover, the students I meet in finance programs (I took a few classes at Columbia’s when I knew I was leaving academic math) and who hope to someday work at JP Morgan are some of the most risk averse people ever. They are essentially trying to lock in a huge salary in return for working like slaves for a huge system.
Fine, so finance attracts people who are risk averse (and love money). That may be the consequence of its reputation and its age. So where are the risk takers? They must be some other field. How about startups?
What has surprised me working at a startup is that a majority of them are also not what I’d consider risk takers. There are a few though. These few tend to be young men with no families. Kind of the “Social Network” model of college aged boys working out of their dorm rooms. The women tend to be unmarried.
This is completely in line with Wimberley’s theory of safety nets, since it seems like once these men find a wife and have a kid they settle (speaking in general) into a risk averse mode. Once the women get married they tend to leave altogether.
In fact I’m kind of an oddball in that I’m married and have three kids and I actually love risk taking. Part of this is that I get to depend on my husband for health insurance, but that’s clearly not the only factor, since you’d expect lots of women whose husbands had steady jobs to be joining startups, but that’s not true.
I also have a feeling that the enormous amount of effort people tend to put into proving their credentials has something to do with all of this- when you take risks you are without title, you win or lose on your own luck and hard work. For a culture with a strong desire to be credentialed that’s a tough one.
I don’t really have a conclusion today but I’m thinking that the story is slightly more complicated than just safety nets. I feel like maybe it starts out as a safety net issue but then it becomes a cultural assumption.