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When Is It Worthwhile To Take A Big Risk?

A case for why Americans are uniquely positioned as risk takers.

When Is It Worthwhile To Take A Big Risk?
[Photo: Flickr user THOR]

Is it risky to marry a someone that your parents pick?

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Common sense (and your mother’s taste) scream yes. Yet many cultures argue it is a better course than total personal choice. Elders won’t be fooled by that tattoo. Or tousled hair. They judge your paramour not only on appearance but by family, character, career prospects, mental fitness, and the potential to create a stable home. This suggests they are weighing long-term outcomes against your thumping heart. Yet we adamantly prefer to choose our partners (and mistakes), thank you. Might it be, perhaps, less risky long-term, to consider an option Mom procures?

As a venture capitalist investing in young businesses and now as an entrepreneur who has raised money, assessing risk has been my job. I’m American, but the time I’ve spent living and working in Europe and Asia have highlighted how differently Americans view and take risk than in other parts of the world. Americans take more risk, more regularly and more disproportionately, than any nation on earth. And it pays off.

Would you risk investing in someone who, for years without traction, has been trying to turn cheap common beverages into an unprecedented outlandish luxury experience? Some American investor did. And today, $6 for coffee doesn’t sound absurd. In retrospect, an early investment in a fledgling Starbucks and founder Howard Schultz doesn’t seem too bad an idea either. But before the ubiquity of America’s favorite cafe, unthinkable.

How about taking a risk on a headstrong, underprivileged uneducated man who moved his baby girls back to a ghetto he escaped to specifically build champion athletes in an elite sport? He didn’t have prior aptitude, background, or even equipment for the sport. A good bet? Well, Serena Williams’s historic U.S. Open win last year was born of the incredible risks her father Richard and those that supported him took much earlier. A great American story. And a tale of massive risk.

If one applied disciplined analysis to these situations they seem losing schemes. Yet risk was taken by all sides: dreamer, investor, consumer. And they were all Americans. And these are not one-off stories; they are a few of countless examples.

From the 1600s on America has been a risk-taking nation. Our earliest settlers were the greatest of risk takers braving the unknown with no surety of success or safety. Risk taking is in our collective historical DNA. We risk daily, weighing what we’re willing to lose in order to gain. And public payoffs encourage more risk chasing greater exploits and reward.

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Risk appetite is also linked to trust. It is why unorthodox ideas take off here first then rapidly spread via imitation and adoption in other countries. Is it why an investor will bet on someone with no experience believing the funds will be used as intended? It is why an invention faltering abroad will finally explode here? We may not be first to market or first to recognize the utility but once we do, we embrace, improve on it, and ramp up quickly overtaking the originators.

Risk looks like opportunity in this country. That is our genius. Americans trust their own abilities and intuition in the face of inexperience and contrary evidence, seeing beyond the desert and mountains. Our imagination and creativity tell us the oasis is there though we can’t see it. And we preach that gospel, collecting converts and acolytes as we go.

Take the Internet. The commercial Internet burgeoned in the U.S. yet it was in use elsewhere first: France’s Minitel. And when you think of the net and entrepreneurship today one place is the ivory tower: America. And specifically, Silicon Valley. Ironically, today, the very place where the notion of commercial Internet found one of its first real footholds, is an innovation and Internet desert choked by bureaucratic, cultural, and other fetters.

It is easier to raise money in this nation than anywhere on Earth. Yes, individualism and wealth play a role in this but there are many rich or individualistic regions where this is not true; the risk appetite just doesn’t correlate. Try to raise money in progressive Scandinavia, trendy England, or the emerging economies of Brazil or India. Parting a man from his money in these places will be exponentially more challenging. The primordial soup that created Silicon Valley and every subsequent generation of dreamer is a home brew; all of the ingredients gelled together here.

We are different: We not only recognize genius but, more importantly, potential. Americans will take risk on the unknown if it is hungry and inflames the imagination. We have even turned failure into a badge of honor. “I have failed over and over and over in my life and that is why I succeed” says Michael Jordan, one of our greatest athletes.

When confronted with failure, Americans ask, What did you learn? Can you come back stronger? Yes? Here’s another check. And that encourages more risk. Elsewhere, failure is synonymous with shame; tuck your tail between your legs and, please, go home. Yet Americans celebrate the value in that stumble. And encourage you to try again. “Don’t be encumbered by history. Go off and do something wonderful,” advised Robert Noyce, founder of the world’s largest, most highly valued semi-conductor company, Intel.

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Americans also freely share knowledge; this open-source attitude allows for better informed risks, driving innovation and success. And that we are willing to risk sharing or helping someone (who might even surpass us) is unique. The free flow of information is most prevalent in this country; elsewhere it is a strategic, guarded resource.

While we have a way to go on many fronts in this country, one thing I know for sure is that if you are a risk taker you will be welcome in America. We are built for risk.

Sarayu Srinivasan is the CEO and founder of Kaargo an online marketplace for consumer shipping and logistics. She is a venture capitalist most recently serving as a private advisor and investor to global companies, prior to which she was an investor with Intel Capital, the private equity arm of Intel, focused on stage and sector agnostic technology investments in the U.S. and the emerging markets.