How to Build a Culture of Risk Taking (Excerpt 7)

Let’s say that you were to line up a hundred brilliant twenty-one-year-olds who might have the potential to start a company someday. You tell them, “Okay, you have two choices. You can commit to being an entrepreneur and start a company. There’s a ten percent chance that you become extraordinarily successful, wealthy and create hundreds of jobs. There’s a twenty-five percent chance that you’re a modest success. And there’s a sixty-five percent chance that you toil in obscurity for years and your confidence diminishes, potentially damaging your attractiveness to potential mates even if you later become more conventional. Alternatively, you can commit to a high-paying career at a well-regarded company, and there’s a ninety-five percent chance you’ll succeed by most conventional standards.”

What would these one hundred brilliant twenty-one- year olds do? Most of them would probably opt for the latter path, because they only have one outcome to consider—their own. They have one life to live, and both the chances of failure and the consequences may come across as unacceptably high. These individuals have often been successful at whatever they’ve put their minds to up to this point, which may make taking on risks unappealing. Plus, their parents likely invested considerable resources getting them to this point, increasing the pressure to ensure a return. And they’re confident that they’ll get dates, learn things, be around other smart people, and make lots of money at a name-brand firm, regardless of their other ambitions.

Let’s change the scenario a little bit. What would happen if you were to line up the same twenty-one-year-olds and have them all spend two years working together and becoming friends? Then you give them the same choice, but with this change: “You will all agree that if you become an extraordinarily successful entrepreneur, you will share the rewards with the other ninety-nine people in this room by hiring as many of them for your venture as you can.” Would this change anything?

Now, each person’s risk would be significantly reduced as long as someone in the cohort does extremely well. As long as one person becomes Jeff Bezos, the downside risk is a position as vice president of something or other at Amazon. That doesn’t seem bad at all. Taking the risky path may be a more reasonable bet for each as a result of the collective understanding.

One way to get a greater number of our most talented young people to embark on the higher-risk, higher-reward path would be to create a community and network oriented around starting new enterprises. It’s a lot easier to take risks if you’re part of a group whose members will look out for each other.

There’s a country that does something a little like this. Its young people, including its very best educational prospects from all different backgrounds, spend two or three years training and solving problems in a nonhierarchical environment and get together every year. Many then collaborate to start companies. This country leads the world in venture capital investments per capita (over $170, versus $75 in the United States in 2010). It has more companies on the NASDAQ than any non-US country except for China, despite having a population of less than eight million. Its quarterly gross domestic product (GDP) growth rate was above 5 percent in 2011 and it’s in the top thirty globally in per capita GDP, above Spain and Saudi Arabia, among others.

This country is Israel, where eighteen-year- olds complete two or three-year tours in the military getting to know each other in highly selective military units. They operate at a high level of autonomy and responsibility and then travel the world for months before heading to college and/or grad school. In Dan Senor and Saul Singer’s book Start-up Nation, this network and training ground is credited as helping give rise to a culture of risk taking and entrepreneurship. By the time Israelis graduate from college, they’re in their midtwenties and mature; in many cases, they’ve already been in operating environments and borne life-and-death responsibilities. This cocktail of experience gives rise to a mixture of both courage and impatience. As one entrepreneur put it, “When an Israeli entrepreneur has a business idea, he will start it that week. The notion that one should accumulate credentials before launching a venture simply does not exist. . . . Too much time can only teach you what can go wrong, not what could be transformative.” Another observer commented, “Israelis . . . don’t care about the social price of failure and they develop their projects regardless of the economic . . . situation.”

In the United States, many college seniors have been students continuously for seventeen years, with their professional experience limited to a summer internship or two. Four-year graduation rates at elite US schools are very high (90 percent for Georgetown and Notre Dame, 89 percent for Yale and Columbia, and so on), demonstrating that most top students are finishing college without significant interruption. It’s not surprising that it might be natural for these graduates to continue to keep their heads down and seek the next step of advancement at every turn, particularly if they were reared in an era of hypercompetitive college admissions.

A group of college educators and administrators has observed that “the pressures on today’s students seem far more intense than those placed on previous generations . . . Even ‘play-time’ is often structured and enriched with just the right mix . . . Summer vacations have become a thing of the past. . . . By high school the pressure intensifies. Students start to specialize in one activity even to the exclusion of other pursuits . . . the ‘right’ graduate school looms after college, and the ‘right’ sequence of jobs is next.” This culture of perpetual advancement fosters the opposite of the Israeli risk-taking I-don’t-care-about-the-social-cost-of-failure attitude.

If we want to encourage a greater variety of postgraduate pursuits, we should give our young people time to look up and explore different options during their college careers. While requiring national service along the lines of the Israel Defense Forces is unlikely, working in different environments for a year or more would give students a sense of how their schoolwork intersects with what they might want to do in the long term. This in turn could make their goals more diverse and independent.

A friend of mine, Neetu, was a top student in Canada. She participated in a cooperative industry education program that had her take the equivalent of a year off between her sophomore and junior years in college. She spent four months working as a marketing associate and youth industry intern for the Calgary Immigrant Aid Society. Then she spent eight months as a business development researcher at a large oil and gas company. Neetu realized that she preferred the private sector because of the higher efficiency and ability to get things done. She took another semester off to intern at a small advertising and design firm. Her experiences influenced how she approached her studies during her senior year in college and how they would be applied in the real world. She began sitting in on advanced courses and joined a marketing club. When she graduated, she went to work as a marketing and communications specialist at an education tech company called Smart Technologies, which she became connected to through a recommendation from the design firm. Smart Technologies went public three years later, in 2010. Neetu credits her year off with both making her studies more productive and giving her more insight into what sort of work and work environment she’d enjoy.

Cooperative programs like the one Neetu participated in are something of a rarity in the United States. If this changed, perhaps our college grads’ choices would change as well. The impact would be compounded if we had people spend months in teams operating and solving problems as the Israelis do; they’d emerge with not only a broader perspective but also with relationships they could call on when it’s time to build something.

From SMART PEOPLE SHOULD BUILD THINGS by Andrew Yang© 2014 Andrew Yang. Reprinted courtesy of Harper Business, an imprint of HarperCollins Publishers.