Good Risk Bad Risk--How to Think about Career Risk

Dave Boyce

Let’s plot your career on a graph. The horizontal axis (the “X” axis) is time, left to right. The vertical axis (the “Y” axis) is the upward movement of your career:

You may have a rapidly rising career (the top line) or a gradually rising career (the lower line). And generally speaking, the more rapid the rise, the more risk you assume.

Risk can be a loaded word with connotations of failure or catastrophe, but economists point out that risk is merely “variability.” High-risk investments (like stocks) have high variability and over time higher returns. Low-risk investments (like bonds) have little or no variability. In exchange for stability, the rate of return on a bond is lower than its higher-risk alternatives. 

How does risk apply to careers?

We can overlay the concept of risk on our Y-Axis graph:

Here we’ve labeled the more gradually ascending line a “Corporate Career” and the more rapidly ascending line an “Entrepreneurial Career.” Risk is represented by the variability around that line, and not surprisingly, the variability associated with an entrepreneurial career is far greater than the variability of a corporate career.

Over the years I have worked with hundreds of MBA students and other young professionals considering career prospects. Often I’m told they would like the returns of a high-risk career without the possibility of everything going up in smoke. Sometimes they can’t afford the risk, given they are carrying large student debt and/or are supporting a young family. However, the lure of high-risk / high-return is strong. The news is full of examples of young people risking everything to start a company, only to become multi-billionaires: Mark Zuckerberg and his co-founders at Facebook; Brian Chesky and his co-founders at AirBnB; Cher Wang and her co-founders at HTC Corp., etc. In MBA culture there is a “cool factor” associated with startups that leaves many feeling like second-class citizens. It’s a sort of caste system: either you are brave enough to do a startup and are therefore cool, or you go to an established company and are therefore spineless.

I don’t buy into this dichotomy.

The Growth-stage Opportunity

In my view, most classically educated young professionals should join what I call “growth-stage” companies. Growth-stage companies have gotten past the early risk of product viability and product-market fit, but they are not yet public. With product and market risk largely mitigated, the remaining risk is execution--something most smart and ambitious workers can help with. Of course, not all growth-stage companies are the same, and when making a job choice you should pay attention to the specifics of Tribe, Brand, and Domain (TBD) to determine which job is right for you. But as a general rule, a company in its early growth stage is the lowest-risk / highest reward for young professionals launching a career.

If it were up to me and I could place the average business-school class into first jobs that would launch their careers, I’d place 80% into the category of “high-growth private companies,” with only 10% going to pure startups and 10% going to large corporations:

This distribution could apply to any set of young business professionals, not just MBAs.

Andy Rachleff, co-founder and executive chairman of Wealthfront and erstwhile professor of entrepreneurism at Stanford’s Graduate School of Business, also advises his students to prioritize high-growth, private companies. In fact, he goes so far as to publish a list of these “career-launching companies” each year (2021 Wealthfront Career-launching Companies List).  

The Lure of Startups

Newell Dayley is the former chair of the Music Department at Brigham Young University. He told me every year without fail he has a certain type of encounter with a graduating music student. Inevitably, this music student has dedicated his life to his instrument: 5 hours per day during high school and 10+ hours per day during college. The question on his mind is, “Should I pursue a career in music?” To which Dr. Dayley responds--in the kindest way possible--”no.” He continues, “I mean no disrespect--none at all. But the very fact you are asking me gives me confidence to steer you away. You see, music is elusive. You can’t choose it--it chooses you. And career success in music is so unpredictable, that unless you couldn’t imagine life without being a professional musician--unless you need it like you need to breathe--you will most certainly be let down by a music career.”  

Entrepreneurism is similarly elusive. You can’t choose it--it chooses you. If you find yourself spending most of your free time and energy working on and building new ideas or ventures, you might be an entrepreneur. If you can't imagine trading that in for a more structured career inside a large corporation, your calling may be as an entrepreneur. If your heart stops beating and you soul slowly dies thinking about not being an entrepreneur, then do it! Otherwise, do something else.

Corporate Careers

On the other end of the risk spectrum is a corporate career. Maybe you feel called to enter a large organization, take the time to learn their customers, product, business processes, and then put yourself into a position to help improve the way they do business. Perhaps you aspire to become an executive and help your company lead in its market.

Here you are expected to turn over your progress to “The Man.” The Man needs you to progress along a measured trajectory that isn’t too fast and isn’t too slow and lands you at SVP exactly in time for you to retire. Tools used by The Man to ensure this gradual progression are:

• Professional development programs
• Promotion eligibility windows
• Title and pay bands
• Restricted Stock Units with vesting
• Etc.

If The Man is successful, you will retire as an SVP with a 2-story house on a cul-de-sac, a Telsa and a Range Rover in the garage, and a Traeger grill in the back. That is a good life, to be sure. But the question is whether it was your life.

The Y Axis

When thinking about your own career, you should define your Y Axis any way you want--it should represent the things you want from a career. Some people want money, fame, power, title, influence, span of control… But however you define it, that is how you will measure career success over time, and we will call this “The Y Axis.”

My father wanted impact. He spent his entire career as a collegiate educator and counselor within the Church of Jesus Christ of Latter-day Saints’ education system. Many of the college students he worked with were feeling lost or confused, or they were searching for purpose and belonging. Dad didn’t pursue this career for the money--he wanted to make a difference. When he passed away, over 1,000 people came to his funeral in Dallas, TX. They had driven from parts of Texas, Oklahoma, and Arkansas. Some had flown in. For my father, this was the culmination of his personal “Y Axis”-- he had optimized for impacting as many lives as he could (How Will You Measure Your Life?).

Most people’s careers are more traditional than my father’s. Most of us focus on advancement, span of control, compensation… We won’t label your Y axis--you need to do that. But let’s consider the risk and reward trade-offs of different ways of attaining your objective.

This is not necessarily an encouraging graph. On the one hand you can have a low-growth career, and on the other you can have a high-risk career.  

To make matters worse, the red zones highlight the riskiest parts of these two paths. As an entrepreneur, your highest risks are associated with your own psychology. When you are on top you might think you actually deserve your success. With this thought pattern comes hubris, followed by over-extension, followed by a big fall. Similarly, when (not if) you crash and burn, you might think you deserve that too. Your own psychology becomes your greatest enemy, and you must talk yourself into getting back in the game. My wife Lisa is a great partner when it comes to the emotional rollercoaster of entrepreneurism. She says--”If you’re going to be the rollercoaster, I’m going to be the station.” Someone needs to remain grounded and not get overly confident when things go well, nor overly despondent when things go poorly.

The risk associated with an entrepreneurial career can sometimes cause you to dip below your peers who are on “safe” corporate paths. This can be soul-crushing if you let it. “Comparison is the thief of joy,” and in order to keep your head in the game as an entrepreneur, you have to focus on your current challenges and opportunities, not look over your shoulder at other people’s seeming good fortune.

Despite how it looks theoretically, a corporate career also has devastating risk associated with it--only deferred. On this track, risk shows up in the form of late-career lay-offs. Even when you carefully follow The Man’s plan with loyalty and precision, things can happen outside your control. Economies and industries and strategies shift. Your manager can move on or get fired. And the later in your single-company career you lose your position, the harder it is to find a new spot. If you’ve never had to step into the unknown, that feels like a very foreign motion. If you’ve never started over, doing that for the first time in your 50s can be daunting--you won’t have developed the muscle memory for how to do it successfully. Taking a low-risk career path to avoid disruption can leave you ill prepared for a circumstance that forces you into change--the very thing you were trying to avoid.

Some people may look at this graph and immediately identify with one or the other trajectory. “Yup--there’s my path. That’s where I feel comfortable, and I am fine with the risks associated with my chosen path. It’s me, and I like it.” That is a healthy, self-aware realization, and if you can see yourself in this graph, more power to you.

But for some, the dichotomy feels tyrannical. “Why do I have to choose? I want a rapidly ascendant career without having to take incredible amounts of risk.”

To that I would say:

1. Consider a growth-stage private company--like the ones on Andy Rachlef’s list. Here you have the most advantageous risk/reward tradeoff. When you join one of these companies and it succeeds, you will have been part of a winning team. You will have surrounded yourself--almost by default--with high-octane people (your “Tribe”), and you will get more credit than you deserve.
2. Or, consider the strategy outlined below:

Intelligent Risk within a Corporate Career

Let’s say, for argument’s sake, that you are an entrepreneur at heart, but the salary at a startup isn’t going to work for you. Let’s say you actually need a big-company salary (student loans, family obligations, etc), and at the same time you don’t want to foreclose on a high-growth career.

Here’s an incredibly powerful secret: Courage is in short supply in corporations. If you take intelligent risks and display courage within a corporation, you can approximate the growth trajectory of an entrepreneur without the associated risk.

Remember, when you join a corporation, The Man puts you on a path that is measured and controlled. You join at a certain level, and every X years you are eligible for a one-rung promotion up the corporate ladder. This is the corporate way.  

But if you think about it, five years before you started at your corporation, The Man also placed another cohort of associates into the system. And five years before that another cohort started, and so forth. With this framing in mind, if you want your corporate ascension to mimic that of an entrepreneurial career, you’ll have to figure out how to “jump tracks” and join an earlier cohort, then jump again, and again:

In every corporation there is that person to whom promotion eligibility rules seemingly don’t apply. There’s always that “youngest-ever VP” or even someone in the C-Suite that is half the age of her peers. Did she jump tracks? Clearly she did. How can you replicate her ascension?

These high flyers often have one thing in common: courage. Think about someone you know who has defied gravity in her career. If you’ve followed her moves closely, you know there were times she took on a job or challenge that seemed ill-advised. Not a sure bet. Risky. Some may have even called it dumb. But in the face of that uncertainty, this person jumped in, surrounded herself with talented people, and continued to move up-and-to-the-right. If you look closer, you might find she also made moves that didn’t work out so well. You’ll see she also took on challenges that failed. But that didn’t seem to stop her from getting tapped for the next high-stakes assignment.

A first strategy for your corporate ascension is to attach yourself to one of these people. In the early stages of career, you can learn a lot from a corporate risk-taker. She doesn’t see the obstacles, but rather the opportunities, and you can learn from her ability to put herself in harm’s way and emerge successful. For the first several years of your career, this can be an opportunity to experience risk without the full exposure of being in charge.

Some of these risks may seem scary--like launching your company’s efforts in Southern Europe (seldom a good idea), or signing up to develop an impossible product, like the “inkless printer.” But in a way, the more challenging the better. You see, nobody wants those assignments--to the average cube-dweller they sound horribly risky. But for you--the person who wants stability and ascension--these are magic opportunities. Someone in leadership decided this was a good idea, and now they need a few brave people to go execute. Generally an aspiring, young, risk-taking executive will be at the helm of an effort like this, so you get a twofer: you get to work on something high-profile (risky), and you get to work directly with someone courageous.

“What happens when the Southern Europe venture doesn’t work out, and I have to come back with my tail between my legs? Will I be able to integrate back into my ‘cohort?’ Will I have been left behind by my colleagues who didn’t take the risk? Will there even be a job for me at HQ?” These are legitimate concerns. But here’s what happens when you return from a “failed” venture: you are a hero. You are spoken of in hushed tones by people who can’t believe you did it and survived. People want to know what it was like, how it played out… They didn’t have the courage to do it, but they are fascinated that you did, and they want to live vicariously through you. Your leadership team now knows your name. And when they have another difficult assignment, they think of you as someone they could call on.

This one, incredibly powerful secret can help you propel your corporate career: Courage is in short supply in corporations.

If you are the one who displays courage, you will be a hero by definition. If you attach yourself to people with courage, you will be caught up in their ascendency by definition. And lest you worry about job security, know this: you will never be fired for courage. It takes courage to fire someone--and most managers don’t have courage. If a manager does have courage, he’ll respect you for having it too, and you won’t be a candidate for firing. As soon as you understand this, a world of possibilities opens up to you inside a corporation. You suddenly realize that you have very little downside risk (losing your job), and if you look for it, you can find lots of upside opportunity (taking on impossible assignments). 

Good Risk, Bad Risk

It may seem we are glamorizing risk. It is true you must learn to take risk in order to propel your career. But that’s not to say you should be reckless. Not all risk is good risk. As an entrepreneur, every risk you take can be existential--there is no safety net. As a corporate risk-taker you rarely risk your job. But in both cases you need to use your head and mind and brain to make sure your risks are calculated. While developing a personal reputation for being courageous is good, a reputation for being reckless or careless is not so good--even within the relatively safe environment of a corporation.

Bottom line, you want to achieve the goals on your own personal Y-Axis. Since The Man has goals that do not line up perfectly with yours, you are responsible for your own career journey. As you think about vertical movement on the Y-Axis, think about the amount and type and timing of the risks you will take.  

If you were put on the planet to be an entrepreneur, do that. If you were put on the planet to help companies during their growth stages, do that. And if you were put on the planet to rise through a corporation, do that with a clear view of how vertical moves are made. Display courage, take calculated risks, and be amazing.

As always, thoughts and comments welcome.

Rock on!

-db

Dave Boyce is a serial software entrepreneur who has helped build and sell four companies. Currently he is Chief Strategy Officer of XANT and board member for Forrester (NASDAQ: FORR). Dave is an adjunct professor of marketing at Brigham Young University’s Marriott School of Business and a frequent guest lecturer at Harvard Business School. Dave and his wife Lisa have 6 children and live in Provo, Utah.