We have all heard the expression “Better safe than sorry,” but is it really true? And, to what extent is it true in business where some financial professionals and attorneys can often be particularly cautious.
I was riding in the car this week with my son when a familiar radio ad came on. “As a parent, how smart are you about child safety? Did you know that the leading cause of death for children age 1 to 18 is automobile accidents?” Of course I did. Everyone knows that. Here comes the buckle up or have your children in a car seat and booster until they are 12 line, I thought to myself.
But before the announcer could belt it out, and because the ad had a dramatic pause, my son quipped, “Don’t ever let your children ride in a car…just lock them up at home until they are 18…and then you can say my children never experienced a car accident on my watch.”
Yeah, my son’s a wise guy, but he had a point, don’t you think?
The radio ad had a point too. I’m glad that there are folks in the government and elsewhere charged with looking out for our safety. And, in business we have lawyers, accountants and others that we frequently task with the same responsibility.
But what most entrepreneurs (and my son) seem to understand in their gut (and what too many lawyers, accountants and governmental agencies don’t) is that every decision has an opportunity cost. Sure, I can almost guarantee that my children are never killed in a car wreck, but at what cost? No vacations? No camping trips? No sporting activities? Never venturing far from home? In our modern times, how expensive is a life without travel once all costs, including opportunity costs, are concerned?
And I can guarantee that I never fail in business, or that I never lose money on a business venture, simply by never taking a chance. But again, at what cost? Forever forgoing the potential “upside”? Sacrificing my independence?
Or, as a final example, I can almost guarantee that my business isn’t audited, or that if it is audited that it passes with flying colors, but…at what cost? Perfection is pricey. Should I always resolve every doubt in the government’s favor? Should I forgo obvious business opportunities due to regulatory uncertainties, or delay them awaiting perfect clarity? How would that approach have worked out for Uber, for example?
We encounter this challenge often as captive managers. Businesses that could benefit immensely from owning their own insurance company are thwarted by well-meaning advisors who ignore the opportunity cost of saying “no”. These professionals were taught in school to primarily consider what could go wrong, not what could go right. They are not to be blamed for that. It’s their job, after all.
But, that’s most definitely not the job of an entrepreneur. Successful entrepreneurs know that few business decisions are ever made with the benefit of certain knowledge of outcomes. This is why business is an “entrepreneurial” (meaning “risk-taking”) enterprise. Weighing risk, weighing reward and making decisions are the activities that separate successful business owners from the rest. They do these things everyday. They don’t fear this process, they thrive upon it. And they don’t delegate this critical responsibility to “advisors” who lack the critical skill set of an entrepreneur.