Transcript
Ben Casnocha:
Today, we’re gonna talk about risk. And as we say in our book, The Startup of You, if you don’t find risk, risk will find you.
And this is one of our favorite topics because risk tends to get a bad rap. You know, we associate it with things like losing money in the stock market, riding our motorcycle without a helmet, scary stuff. But it’s not the enemy.
Risk is pervasive. It’s permanent. It’s part of every life experience. Everything we want to do has risk associated with it. And so, weirdly one of the riskiest things you can do is to assume there is no risk, and try to minimize risk, and to avoid risk.
You can’t avoid risk. It’s omnipresent, and it’s an essential entrepreneurial skill to know how to navigate it.
Reid Hoffman:
Well, and actually a little nuance that is: minimizing risk actually can be a smart play, but trying to do everything to minimize it to zero is almost always a dumb play. Right?
And, what’s more, when you look at risk, because there’s risk of you say, “Well, but I have a really stable job.”
It’s like, “Well, is the company stable? Is your management relationship stable? Is the industry stable? You know, is just staying there where you are the thing that you’re really looking for? Are you looking to make progress?” All of this stuff enters into: there’s a bunch of risks that are beyond your individual ability to control, right?
You might be able to mitigate them and everything else. And it’s actually one of the things where like, people don’t understand about most very successful entrepreneurs, which is: they just think, “Oh, they’re crazy risk takers”. It’s actually in fact: they’re smart risk takers.
And actually in fact choosing the risk that gives you a real competitive advantage; that allows something that could be a breakout opportunity; in the case of an entrepreneur, creating a product or service, a new company, transforming an industry. But an individual joining a new industry, joining a new company, taking a job and a transition that leads to a path where not only do you survive and have resilience, but you thrive and you’re happy and you’re doing work that you feel very proud of, and you feel very competent and growing and skilled at, and almost all of that involves taking some risks.
Ben Casnocha:
Every important career opportunity has risk associated with it. If you don’t at times feel nervous about the risk that you’re—you might encounter or take on as part of pursuing a new opportunity, landing a new job, it’s probably not a breakout opportunity.
One of the attributes of breakout career opportunities is there’s an element of risk. And so if you’re listening to this thinking, “Well, this topic isn’t really relevant to me,” or, “I don’t really think about risk,” or, you know, “I haven’t felt like risk was relevant to me in years,” maybe it means you’re not playing sort of an ambitious-enough game taking on the sorts of opportunities that could be career-defining.
Reid Hoffman:
And one of the things that people frequently do is they think of risk as like risk: capital R-I-S-K. And they don’t realize there are all kinds of different risks. Now there’s some risks that are really big. Like, if, for example, in the career context, you end up out of work, no immediate job prospects, you have to work really hard to get back to it. That’s a big risk. That’s something you say, “Well, I’m really gonna try to navigate around that.”
You know, part of the ABZ Planning framework that we have here is one of the really good ways to navigate that the right way. Various things to say: how would I get back to being in the flow of work? What would be the intermediate steps that I would need to do in order to do that?
You know, all of that is I think very important. Now, there’s a whole bunch of risks that are not that. Like, for example, you say, “Well, I spent a couple months doing some volunteer work or a side hustle. Took some of my other time away, made a little bit more tired. Didn’t quite as much go out and have fun with my friends.” But that’s a very small risk and that small risk could lead to something particularly interesting. And so you wanna evaluate, “Well, which other risks?” Right?
‘Cause if the risk is: small opportunity costs; easily recoverable; possibly something that would be really interesting to learn; open a new door; provide one of a set of steps of making a very significant choice; open up possibility of a very significant opportunity, then you’d wanna do it.
And that’s part of what smart risk is. Sure, it’s a risk, but if it’s a risk that you can recover from that possibly has a significant learning or significant upside, then that’s part of where you’re being competitive-differentiated.
Because one of the things is: all human beings have a reflex to go, “Risk, risk, risk, risk: avoid, avoid, avoid. Risk is a four letter word.” The vast majority of human beings have this instinct. And so if you’re taking smart risk, that’s one of the ways to give you a competitive advantage in having a really amazing career, in getting a really amazing opportunity.
Ben Casnocha:
And as you say, Reid, the—assessing risk is really important.
I think one of the things that’s critical about the real world versus the academic world of risk models is that in the real world, we often don’t have complete information. Things are moving quickly. We have to make decisions in sort of murky, gray, foggy conditions.
And so, you know, if you Google this topic, you’ll find lots of academic modeling, WallSstreet frameworks for assessing, you know, financial markets risk. But in the real world, as an individual person trying to run an entrepreneurial life, much of that advice—or for those frameworks or models—are not particularly helpful.
And so one of the things we try to do in the book is lay out a set of, you know, practical tips and tricks for making better risk assessments day-to-day.
And, you know, one of the things we say—sort of piggybacking on your last point there, Reid—about “it’s easy to overrate risk in our minds” is we talk a little bit about what psychologists called the ‘negativity bias’, which is this idea that we’re wired, evolutionarily-speaking, to play a kind of conservative game in life, right?
Our sort of mandate is to survive and pass on our genes. Going out and pushing yourself to explore and deepen your mind and take on a dynamic life path that will be fulfilling and interesting and change the world—that’s not really part of our natural makeup. That’s why so many of us by default will encounter an opportunity, encounter a career scenario…in our own minds, really ratchet up the fear and overrate—overstate the risk that it may involve, right?
We can tell ourselves a story of, “Oh my God, I can go to my boss and pitch him or her on this project I’ve always wanted to do, but…if they say no, or they reject me, that will be terrible, and that might be destroying my career, and I’ll get fired, and then once I get fired, I’ll never be able to find another job after that. And this will be terrible…Okay, so I shouldn’t go talk to my boss. I’m just gonna stay a good little loyal soldier and put my head down.”
And that kind of self-talk can be very destructive. So the first, you know, tip that we might offer is: when you’re evaluating a risk, just know that you’re probably biased to overstate the risk, and a lot of things are actually not as risky as you might be telling yourself.
Reid Hoffman:
So I’ll give two examples from very early in my career about risk decisions.
One was: decided not to be an academic, was at Oxford…“Okay. I’m gonna turn down these job offers from the management consulting firms and the investment banks because I don’t think that’s the right fit for me. I actually think going and creating technology, and the technology industry, and building things are the right fit.”
I didn’t have anything. But I called a few friends and I said, “Look, is the industry vibrant? Is it—able to get in?” They said, “Well, you might have to do some consulting first, and you wouldn’t necessarily be given a full-time employee position first.”
And I said, “Okay, great. I’ll take that risk, and I’ll navigate that. And I’ll do that because that’s so important from that kind of different choice.”
Then, as per your—your last thing is my first way of getting into working at Apple, working on this project called their eWorld product…the way—the path in was through the user experience group. Because we’re like, “Look, I’ll do these things, and I’ll start as a contractor. I’ll become a full-time employee.”
But as I began to assess that, I realized that that wasn’t the right career path for me. You know, I was learning some interesting things. I was contributing in useful ways. But that path was—I was getting out of that there. And that product management would be a much better place for me to be relative to creating products, possibly becoming an entrepreneur, other kinds of things.
And so I went to the—not even my boss, although actually, I think I mentioned to my boss that I was gonna go to James Isaacs and say, “Hey, I’m gonna write out some product plans. Would you please read them? And if you like them, would you assemble a group to listen to them, and, and—”
Ben Casnocha:
Just to unpack that risk there, ‘cause that’s interesting: this is a subtle point about sort of org politics and stuff, which people should probably think about if they work at a large company, especially, which is: you went to your boss’s boss or some other senior leader in the organization who was not your direct manager, and basically said, “I know I’m being employed and paid to do X, but on the side, I wanna also do Y.”
And there’s risk involved in that because first off, you’re going above your direct manager to somebody, which is always challenging an organization. And then also you’re basically saying, “I want to be distracted from my job to do this other thing that I want to do.”
And so it would be totally logical for you to have said, “Oh, that’s not worth it because what if this boss’s boss says, ‘Get back to work. What are you—what are you talking about kid? Like, this is not—this is not what we hired you to do.’”
Reid Hoffman:
Yes. And so I actually think I did talk to my boss just on a, “Look, I’m gonna go ask to do this, by the way. It’s not gonna affect my work at all.” So it’s like, “Oh, I understand the normal objection to this. And I’m gonna make sure that it doesn’t.”
And I was like, “Okay, fair enough. Let me know if it does,” was kind of the answer. And then I went to James and I said, “Look, it’s totally good if like you look at it for two minutes and you don’t think it’s worth the time. That’s totally cool. I just think it’s really important for me to try this.”
And I also had gotten to know James well enough to know that he was kind of an encourager of young talent. We’d had good conversations before.
So he said, “Sure! Like, fine, you’re gonna go and spend a weekend working on something. You’re gonna deliver me something. You know, I’m gonna print it out, I’m gonna open up Page 1. If I, by Page 2, I’m like, ‘Ehhh’. You know, you’ve given me the out where I can say, ‘You would need to really improve this a whole lot.’”
And then of course I put in a ton of work to make it interesting and good, such that James’ reaction was, “Oh, this is kind of interesting. Let me assemble some of the product managers. Let’s sit down and we’ll do a group critique of this.”
Ben Casnocha:
So another technique we talk about in the book is to think hard about a risk before walking through our one-way door. And this is kind of a funny inside baseball book-writing thing.
So 10 years ago, we wrote the first edition of The Startup of You. We talked about decisions that are reversible, and decisions that are not reversible. And we said, “Be really thoughtful about decisions that are not reversible. Like those sorts of risks that are things that you cannot undo are risks to really be on top of.”
And then sometime in the last decade, Jeff Bezos gave a speech in which he talked about one-way doors versus two-way doors, which is the exact same concept that we had articulated in the book—and probably others had written about, I’m not necessarily certain we invented the idea of reversible risk—but speaking to the point of the power of phrases and coining things, this one-way door/two-way door thing that Bezos coined really took off, and is indeed a really memorable way to put it.
And so we, in the revised edition, updated our tip here and talked about it in Bezos’s terms—one-way doors versus two-way doors—but it’s this more straightforward concept of: if you’re thinking about a decision that you can’t undo, be careful about it.
And one of the examples we give is, you know, a great entrepreneur Michael Dell; started Dell Technologies in his dorm room at the University of Texas, but instead of fully dropping out to start the company, he wanted a leave of absence.
Just created the optionality—it was a little bit, he says, to assuage his mother’s concerns. And probably a little bit of just the rationale of, “Hey, I don’t know if this is gonna work. And I’d like to go back to school if this doesn’t.”
You know, in that case, it’s trying to enable some reversibility to a decision, but if there’s truly no option, and it’s like, “I have to either drop out or start this business,” that’s where you really wanna be doing a lot more network intelligence, a lot more analysis, a lot more reflection to make sure that that’s a risk worth taking.
Reid Hoffman:
And also the one thing—while the one-way and two-way door is a great and compelling metaphor and frame for thinking about things. Part of the reason why we bowed to a smart framing and said, “Let’s use that one!”—
Ben Casnocha:
Bowed at the altar of Jeff.
Reid Hoffman:
Yes. Well, and also, look, this is how we all learn. It’s kind of what are the different frames for doing these things and what is kind of compelling that everyone can remember and have heuristics and principles to apply?
Actually in fact, frequently you really can’t get back to where you were before. The two-way door is…it’s actually not that, it’s like, what are your risk mitigations?
That’s part of the reason why we do ABZ Planning, because like, look, I’ll go through this door, but can I get back to another point? Or can I shift path in a way that isn’t like the, for example, is it a one-way door that’s off a cliff where I have no parachute? Or is it a one-way door where we go, “Well, okay. That’s a one-way door, but I can also do X, Y, and Z”?
Ben Casnocha:
Yeah. It’s a good point. I think the issue is the two-way door, what you’re picking up on, which is a fantastic subtlety, which is: if people think that you walk through the door, “Oh, it’s the wrong decision. I step back out the door and I’m back in the exact same place I was before.” That’s a myth.
Reid Hoffman:
Yes.
Ben Casnocha:
Right? ‘Cause the world’s changed. You changed. Competition—
You can never just simply roll back the clock. I think the idea of the two-way door or the reversible decision is you can roll the clock back to an asset position that’s equivalent to where you were before. But it won’t actually be the same, like, location on the map.
Reid Hoffman:
Yeah. Hundred percent.
And, and like, for example, that’s like the, ‘try something on the side hustle’. Go write a product management plan on the side. It’s like, “Okay, that didn’t work. Okay. I just keep doing my job or try again in a different way, etc.” All those are largely in the same place, and of course what is meant by this.
But part of the reason I go to the more general framework is because you can go through one-way doors, not have them be totally as risky if you think, “Well, I do have other paths that I get to. It’s not ‘go back through the door’, but I can fairly quickly move to this other door—right?— and go to this other thing.” And that’s part of the ABZ Planning framework.
So it isn’t only the draconian one-way door or the two-way door. There is a nuance of kind of like what the risk mitigation and taking risk smartly, intelligently, how you can plan it, and how you can monitor it, and how you can navigate it.
Ben Casnocha:
Now, Warren Buffet once said, “Be fearful when others are greedy, be greedy when others are fearful.”
And we apply that same principle to the career landscape, which is: one of the more interesting ways that you can take risk in your career that could provide or create differentiated return is: to pursue opportunities where other people have sort of irrational fear—where opportunities are mispriced on a risk basis.
And so it can kind of be fun to think about things you can do in your career where a lot of other people are avoiding that opportunity, but you have a sort of smarter, differentiated perspective on the actual risk involved.
And so one easy straightforward example here is a lot of people, especially younger people, overrate how much job will pay, and underrate how much they can learn.
And so jobs that pay less, but offer tremendous learning can be jobs that some people would say is too—are too risky: “Oh my gosh, I’m barely gonna, you know, make ends meet, make rent, etc.” But you with a better appreciation of soft assets can see, “Ooh, that’s actually an opportunity that’s worth pursuing.”
Another example of a career opportunity where people often overstate the risk—and so you could see a differentiated edge—is part-time or contract gigs, gigs that are less stable. Right?
We tend to have this thing of—a lot of people have a psychological bias where, “Oh, this isn’t like a full-time job position? That’s risky!” And in fact, as we talk about portfolio careers in the book—a new theme in the updated edition—sometimes a contract gig, 20 hours a week, 5 hours a week for a year-and-a-half…Sometimes those are those very sorts of gigs that can actually produce tremendous network value, a lot of learning, or just serve as a trampoline to your next great career opportunity.
Reid Hoffman:
And I think part of the question about how to frame for yourself, how to think about it is…like think, “How would I be in the much stronger place relative to my entire career three years from now, or five years from now?”
And usually the 5% higher salary is very rarely that determinate of that. It’s much more the right work opportunity, the right hiring manager and relationship, the right kind of learning and soft skills, the right industry to be part of, and so forth. And that’s—those are the things to stretch for, those are the things to push at.
Like one of the things that—if I could call my younger self, and say how to make decisions—‘cause I was making decisions a lot on well, would I get a product manager job, and everything else—is, “No, no. Go to the places where the network density of amazing people, you know, working.”
Like a classic one in the lore of Silicon Valley is General Magic, which was a company that didn’t succeed. But a whole bunch of the people who worked there were all working on super interesting advanced things. They were bold technologists. They were, there’s a—
Ben Casnocha:
Have you seen the documentary on that?
Reid Hoffman:
The documentary’s really awesome.
Ben Casnocha:
Have you seen it? Yeah.
Reid Hoffman:
Yeah.
Ben Casnocha:
I haven’t seen it yet. I’ve heard it’s awesome.
Reid Hoffman:
Yeah. It’s awesome. Right.
And so go to where that network of amazing talent will be, and you’ll learn a bunch there, and you’ll have a chance to do other jobs. Right?
Silicon Valley is replete with this. It’s like working at Netscape; it’s working at—like, all of these things are like, “Oh, if you did that, then you had all of these other choices and paths and learnings and everything else that came from that network from where it was.”
And I think that’s one of the things that I think is important. That’s the broad picture of the soft assets.
Ben Casnocha:
And for more senior people, a risk that other people often overstate, and where you could thus have a differentiated perspective—we talk about this in the book—is hiring someone onto your team who doesn’t have a lot of experience, but who’s a very fast learner.
So a lot of people think, “Oh, this person’s inexperienced. That’s risky.”
There are a lot of really amazing talent that’s overlooked or passed over for certain opportunities. But if you have this lens of learning clock speed—depending on the industry and work that you’re involved in, but certainly the tech industry, this is key—you can find some amazing people who others have passed over because they have fewer years of experience, sometimes no experience whatsoever, but you believe that within six months they can get up to speed and crush it at the job that you’re hiring for.
And the flip side of this, just in close, is there are also risks that are underrated.
There are career decisions that they’re trying to make where they actually underappreciate the risk, and the risk that—you know, we’ve hinted at this in this conversation, Reid—but working at a company that’s a great company and a great industry, but with a bad manager…is riskier than you might think, right?
So, “Oh, I’m gonna go work for Google. What a great brand, they’re paying me a ton, there’ll be tons of learning in theory, across this network!” But the manager is a micromanager who makes you feel like crap, who constrains your ability to learn and network with an organization. That’s actually a really risky career move.
Now the final concept we want to talk about with risk is how to build resilience to unpredictable risks, ‘cause part of the ultimate game here is: risks are gonna happen, you can’t always anticipate them, the world’s a crazy black swan place.
So how do you strengthen yourself? How do you build up a sense of resilience to risks when they hit you?
And, I’ll never forget when I was a kid, I was driving with my mom on Highway 280 in the Bay Area. And looking out the car window, I saw the smoke in the air, and I remember asking my mom, “What’s all that smoke? Is there a fire?”
And she said, “Oh yeah, there’s a fire, but it’s an intentional fire.”
And I said, “What’s an intentional fire? Why would someone have lit that forest on the side of the highway? Why would someone have intentionally lit that on fire?”
And she tried to explain. I can’t remember how old I was, but I was not old enough to actually understand the concept of controlled burns. When you think about it, it’s a very unintuitive concept, and a kind of fascinating one, this idea that setting a forest on fire actually reduces the opportunity of a big fire later, and small fires prevent big uncontrollable burns.
And one of the things that’s critical for a modern career is to make sure that you are, in a sense, setting lots of small fires in your life just to build your resilience to an unexpected wild fire that could take root.
And, you know, our friend, Joshua Cooper Ramo—in his excellent book, The Age of the Unthinkable—talks about the difference between the stability of Italy and North Korea. Italy has a lot of day-to-day volatility, its politics is a mess; lots of dynamism in that democracy, chaotic free speech, corruption investigations in Italy, and prior presidents.
And you look at North Korea, which has had, hey, a singular leader for all of these years, and the people are all thrilled and the media reports a very stable image, but, of course, Italy may have more chaos day to day, but North Korea has only the illusion of stability. Long-term, North Korea is a much more fragile state than Italy.
And so, thinking about your career in this context, of course you wanna be Italy, not North Korea. You wanna be setting controlled burns, not the brown crispy forest that hasn’t had a fire in 20 years, just waiting for the next pandemic, uh, to burn down your.
Reid Hoffman:
And another metaphor is, like, how do you build muscle? It’s like straining.
For example, classically you have to strain to a point where you can’t do that extra rep of the curl or the press. And so—and that kind of straining is a similar kind of thing of, you know, put yourself in some position where you’re straining some in selective ways to build up your muscles, to build up your resilience, to build up what you’re doing.
And I think, like, it can start with—take small risks. Right? It’s just like, “Hey, do little things like that”—like the, “Hey I’ll go write a product management plan, and try it. I’ll reach out to someone through LinkedIn—a network that I don’t know—reach out and try to make that connection on an informational interview or something else as a way of building bridges.”
And there’s always some risk of reaching out to new people. But again, it’s a small risk.
Ben Casnocha:
I love your muscle example, Reid, because there’s a Navy SEAL saying, “Under pressure, you don’t rise to the occasion, you sink to your level of training.”
And a high-stakes career moment—when there’s a lot of turmoil in the market. or the competition’s changing, or new technology might be rendering your skillset at a date or under threat—you’re gonna sink to your level of resiliency. Right?
And so all of the things we’re talking about of taking small risks is like building up that muscle, doing the training so that you’re ready when that moment strikes.
What are other ways that people can introduce volatility into their careers?
Reid Hoffman:
Well, other ideas that are also in the side hustle is like: go to a conference that’s—like a conference in a different industry or different than what you would normally do. You know, assemble a group of people to talk about something, and say, “Hey, let’s get a lunch group together, or a dinner group together.” Like I could do those things on, you know, kind of product management.
If you can, kinda say, well, actually in fact, I’ll go take an evenings class or a—or if you, you know, can take a week’s vacation, but use the week’s vacation to do a week-long class. And generally speaking, most good managers will be comfortable with saying, “Look, I’m gonna take a class where 3 to 5 on Thursdays, I’ll be off. I’ll make up the time and other things, but I’m gonna be doing this because—”
By the way, keeping up your resiliency is also really great for your team, for your employees, for your, you know, intellectual curiosity, and doing things..
Ben Casnocha:
Yeah, totally.
And I think if you’re going to a conference, like, I think the idea is to push yourself to take a risk, to maybe try to speak at the conference. Hey, maybe the speech goes disastrously and you embarrass yourself, or—but that’s part of what we’re doing here.
So it’s not slink around, playing the safe route. It’s trying to do things. It’s reaching out to somebody who you might be scared might reject you, or with whom you might be nervous about how to meet them and seem smart, or whatever. But it’s pushing yourself so that if some things don’t work out, you’re building that resilience, and all this is about training yourself on handling risk and making surprise survivable.
So, Reid, let’s close by just thinking about how people can invest themselves really practically, speaking on risk. And I think one of the things we’ll start with is just reflection—so much of these ideas start with some internal reflection that people can do for themselves, which is: when did you last feel fear over a career decision? When were you last scared by a risk?
That’s something everyone should ask themselves, and sort of look back—what’s the line? Is it a…some Roosevelt? Who said, “If you don’t do one thing that scares you every day…”?
And then the other thing that we want to encourage everyone to do here with—related to the risk topic is: anytime you’re thinking about how risky a particular thing is, use your network. This won’t be a shocker to people who are listening to these episodes and reading the book.
But it’s your network that can help you. If you acknowledge that there are some internal biases, it’s hard to think thoughtfully and clearly about risk. Don’t sit on your own and try to think this through; talk to smart people in your network. Help them help you figure out how risky an opportunity really is.
Reid Hoffman:
‘Cause one of the key things that we have in The Startup of You is the ‘you’ is both singular and plural. And it’s part of the reason why we use this kind of deliberate joint of singularity and plurality in the title because life is a team sport. It’s ‘I’ to the ‘we’.
And, in key things, what—everything from network intelligence to risk-taking, that’s precisely when you should ,ake sure that you’re assembling and deploying your team in order to make that as effective and as smart as possible.
Ben Casnocha:
So, Reid, for now, thanks for the conversation. Great stuff.
Reid Hoffman:
Thank you.