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Thoughts from the UKIF Membership

Richard Atkinson   -   The Third Dimension of Risk

Richard is Chief Executive of Second Mile Ltd and is an experienced technology entrepreneur who has led start-ups in the cleantech, automotive, communications, defence and software sectors. This week he writes:

Risk.  It’s what makes startups more like snakes and ladders than chess.

Risk is often considered along two dimensions.  First, how bad could it get?  And second, how likely is it to get that bad?  I’d like to suggest that there is a third dimension of risk, and that this third dimension collides with a flaw in our psyche to create a real danger zone for startups.

This third dimension is quantifiability.  Some risks are easy to box up, tie a bow around and feel safe from.  Others are shape-shifting demons that only time, money and attention will appease.

The psychic fault line that turns this from a curiosity to a problem is that most of us have an ambiguity thermostat.  Too little, we’re bored.  But too much, and we get twitchy.  The desire to reduce ambiguity, to bring a situation’s quantifiability back to a level we can feel comfortable with, is instinctive and compelling.

Responding to that compulsion, the risks most likely to get attended to are those that, well, that can be attended to.  Those you can box, tie and feel smugly safe from.  The shape-shifters are more vexing.

The problem is that it’s shape shifters that kill most startups.  Customers aren’t buying and you don’t know why.  The team isn’t gelling and you’ve tried everything.  The kit has gremlins that won’t go away.

Your business plan didn’t see these coming, you couldn’t size them, cost them or lay out the causal trigger chain for them.  But here you are.  It’s beginning to feel like stumbling in the fog while someone shouts directions at you in a foreign language.  What you need now is runway.  Runway is time.  Time for the data to clarify.  Time to change hires that aren’t working.  Time to pivot.

And here’s the intersect:  eliminating a risk usually takes money.  And money is runway.  But it’s extraordinarily hard to publicly carry a solvable risk (remember you’re not the only one with an ambiguity thermostat) for the vague notion of a week’s runway sometime past Christmas.  For some reason the lawyers seem to be especially skilled at this temptation.

But here it is in a nutshell:  Don’t let your emotions put your attention on lesser risks you can quantify at the expense of more important risks you cannot quantify.   In a game of snakes and ladders, the chance to throw again can make all the difference.

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