Entrepreneurship, ambiguity and risk

It's now been a little more than a year since I left Goldman Sachs to work on Notches full-time. Initially, many of my family and friends talked about how impressed they were about me taking such a "risk". In fact, that's the thing that scares most people out of starting their own business – they just consider it too "risky" to be out there on their own.

I always said that what I'm doing really isn't all that risky, since I had just finished my law degree and leaving Goldman was an inevitability. The big question was whether I would try to follow the well-worn legal career path: join a law firm, bill a lot of hours and eventually make partner or try to become in-house counsel somewhere.

Ultimately, I wanted to forge my own path. I decided to start my own business because I felt it gave me an opportunity to put my technical, legal and business skills and creativity to work in a way that I could create value, in a way that was appreciated instead of marginalized. Building something of your own is certainly rewarding, but I think what really appealed to me were the possibilities.

In other words, there was no road map. There was no set path – entrepreneurship is, by definition, creating something new. It was these possibilities that I did not see at Goldman or in a legal career that really rang out to me.

As Reid Hoffman put it, in the current economy and job market, we're all entrepreneurs now – but that isn't always true especially within larger organizations.

Jim Collins (of Built to Last and Good to Great fame) made this point very well in a recent Inc. interview. 

How do you define entrepreneurship?

I take a broad view of it. The traditional definition -- founding an entity designed to make money -- is too narrow for me. I see entrepreneurship as more of a life concept. We all make choices about how we live our lives. You can take a paint-by-numbers approach, or you can start with a blank canvas. When you paint by numbers, the end result is guaranteed. You know what it's going to be, and it might be good, but it will never be a masterpiece. Starting with a blank canvas is the only way to get a masterpiece, but you could also blow up. So, are you going to pick the paint-by-numbers kit or the blank canvas?

It has to do with your ability to handle risk, no?

Not risk. Ambiguity. People confuse the two. My students used to come to me at Stanford and say, "I'd really like to do something on my own, but I'm just not ready to take that much risk. So I took the job with IBM." And I would say, "You're not ready for risk? What's the first thing you learn about investing? Never put all your eggs in one basket. You've just put all your eggs in one basket that is held by somebody else." As an entrepreneur, you know what the risks are. You see them. You understand them. You manage them. If you join someone else's company, you may not know those risks, and not because they don't exist. You just can't see them, and so you can't manage them. That's a much more exposed position than the entrepreneur faces. But there's lower ambiguity on the paint-by-numbers path: very clear but more risky. The entrepreneurial path: very ambiguous but less risk. Of course, the truth is that it's all ambiguous, anyway. If you think you can predict the future, you're crazy.

This distinction between ambiguity and risk is an important one. Starting a capital-efficient technical business wasn't really risky, in the sense the sense that I really stand to lose anything. Mostly, it comes down to opportunity cost and even there it's not clear I really lost anything. Though I do not collect a salary, we have adjusted our lifestyle accordingly, have a very low cost basis, and saved for this upfront. On one hand, I could have made, say, $150,000 if I joined a law firm in NYC as a first-year associate. On the other, I have gained experience and knowledge and had leadership opportunities I would have never had at a law firm or at Goldman. Ultimately, I have to believe that I will have even better opportunities available to me now that may be worth well-more I have opportunities available now that I never would have had last year.

Whether or not Notches is ultimately successful, it has certainly taught me that I'm happier when I follow an entrepreneurial path – not because of the risk but because of the ambiguity. I relish the ambiguity, because the ambiguity is what brings possibility.

(Editor's note: This post was republished to feature)