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Telling the stories of startup founders and creators and their unique journey. Each episode features actionable tips, practical advice and inspirational insight.
00:00:00:00 - 00:00:10:08
Welcome to the Founders Journey podcast. Inspiration education for Founders by Founders.
00:00:10:08 - 00:00:33:14
Hey there. I'm Greg Moran, co-founder of Evergreen Mountain Equity Partners and host of the Founders Journey podcast. Today, we're going to explore another trait that's common in World class founders. And this comes out of our groundbreaking research that we just released on the entrepreneurial adaptive innovator archetype. So it's just an interesting way to kind of look and frame why.
00:00:33:16 - 00:00:56:15
What are those common elements among the world's best founders and startup leaders? And the one trait we're going to hit on today is something that all entrepreneurs face. And that's balanced risk taking. Right. And that's figuring out how to get a balance and risk taking. This is the ability to take calculated risks to drive growth and innovation without actually being reckless.
00:00:56:15 - 00:01:19:24
And this is a hard balance for a lot of founders to to find. If you've ever wondered how to make bold moves while managing risk, this video is going to be for you. We're going to dive into examples from Reed Hoffman and Jeff Bezos, two masters of really balanced risk taking. So let's get started. So balanced risk taking as a trait is all about knowing when to take risks and more importantly, how to manage risks.
00:01:19:25 - 00:01:43:17
So it's a key trait of successful founders at Evergreen Mountain. The number one thing that we invest in is the quality of founders and their ability to make decisions, and part of that comes down to their ability to mitigate risk. You can invest in a founder all day long as a VC, but if the but if that founder drives the business quickly into the ground because of overly extreme risk taking, it doesn't do you any good.
00:01:43:18 - 00:02:11:21
So we often see two types of entrepreneurs, those who take reckless risks and those who take very calculated risks and assess each move. The biggest difference the calculated risk takers grow, sustain, and they usually avoid catastrophic mistakes. It doesn't mean they always succeed, but the really big disastrous mistakes are fewer and far between. So it's really about weighing the potential upside and the potential downside of a decision, and knowing when to jump in and when to step back.
00:02:11:22 - 00:02:31:09
So let's start with Reid Hoffman. He's the co-founder of LinkedIn and he's a great example of how balanced risk taking really works in practice. Hoffman is one of the Silicon Valley's most successful entrepreneurs, and he's really known for his calculated approach to risk when he founded LinkedIn. He didn't just jump into the social networking space with a broad platform like Facebook.
00:02:31:09 - 00:02:58:26
He made a calculated decision to focus on the professional networking niche, so he recognized a gap in the market, a place for professionals to really connect and advance their careers. But this wasn't a reckless gamble. He had data and he had market insights to really back his decisions. So by choosing to focus on a really specific, underserved market that's professionals looking for networking and career advancement as a social media platform.
00:02:58:29 - 00:03:22:01
Really what what he did was he minimize the risk while positioning LinkedIn for really long term success. So it kind of kept him out of the fad of those early stage social media platforms. So this is a classic example of balance risk taking a decision that had really high potential upside. But it was really carefully mitigated by focusing on a very specific niche.
00:03:22:04 - 00:03:44:23
So I want to switch over to Jeff Bezos. He developed a unique framework for making decisions at Amazon, and this is his famous one way door and two way door decision framework. So what this method really allows Bezos to do, and his team to do is assess the risk of every decision by determining, is it reversible or is it irreversible?
00:03:44:23 - 00:04:11:18
A one way door decision is one that's really hard, if not impossible, to reverse. It's a super high stakes move. Probably can't undo it. So, you know, a good example would be when Amazon you know, Amazon's acquisition of Whole Foods once made, these decisions can't really be undone or the really hard to really expensive. What Jeff Bezos does is he ensures that these types of decisions are made slowly, with careful analysis by larger teams.
00:04:11:19 - 00:04:31:18
It's also about minimizing risk on irreversible moves, right? So it's all about minimizing the risk on irreversible moves. On the other hand, a two way door decision is one that can be reversed. It can be adjusted, it could be undone. And there's probably not going to be a huge consequence to that. So what he does is encourage his team to move fast on these decisions.
00:04:31:18 - 00:04:53:13
Do it with small teams so you can think of these like experimenting with the new feature on the Amazon website. If it doesn't work, you could probably pull it off. They can reverse it. You learn from the mistake and you try something else. So with this framework really does is it allows Amazon to innovate without the fear of failure because the risks are controlled and those risks are controlled by bifurcating those risks.
00:04:53:13 - 00:05:18:14
Depending on the level of severity if things go wrong. So the distinction between the one way and two day doors is a really brilliant way to practice balance risk taking. For one way doors, he takes calculated risks, ensuring that the really the potential rewards justify the irreversible commitment that's going to get made. And for two way doors, what he does is foster Jodie Foster experimentation because he knows that any failure can quickly be corrected.
00:05:18:15 - 00:05:35:16
So how do you apply this framework in your business? First, you got to start to categorize your decisions. Ask yourself, is it a one way or two way door decision? If it's one way, take your time. Work with your board. Work with advisors. Work with your team. Analyze it carefully and fully. There's no hurry. If it's a two way door, don't overthink it.
00:05:35:16 - 00:05:54:24
Move quick. Learn from the results. Accept the failures. Learn. Step back. Undo it. Move forward. Experiment again. And that goes to our second point. Experiment with the reversible decisions. Take risks in those areas where you can reverse course if you need to. This lets you innovate without the need of, you know, without the fear of really catastrophic failure occurring.
00:05:54:25 - 00:06:15:23
Third, you really got to plan carefully for irreversible risks. So for major decisions like you're going to enter a new market, you're going to change your target market or your ICP. You're going to acquire a business. You're going to bring on new investors to make sure you've done the research, and that the reward really justifies the risk. Move slow on that.
00:06:15:23 - 00:06:51:17
So balance risk taking isn't about making giant, bold moves without risking everything. But by learning from leaders like Reid Hoffman, Jeff Bezos, you can really take calculated steps toward long term sustainable success in your business and start to develop that balance, risk taking trait in yourself. So if you want to dive deeper into this and the other traits that define successful founders, download our free whitepaper over@mep.io that stands for Evergreen Mountain Equity Partners, M ept IO and download the white paper Understanding the Behavioral DNA of Successful Founders.
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Before you go, don't forget to like the video. Subscribe to the channel. Hit the notification bell so you never miss an episode, and drop a comment below on your thoughts. How do you manage risk in your business? We'd love to hear it. So thanks for joining us. We'll see you next time.