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The Audacious Secret That Every Top CEO (and Gambler) Uses to Win

Audacity gets a bad name in corporate circles, but not among the folks behind The Audacious Project.

Now in its second year, the TED-backed collaborative funding initiative matches bold thinkers with visionary funders to create moonshot projects with the potential for a massive social impact.

According to the website, “Every year we select and nurture a group of big, bold solutions to the world’s most urgent challenges, and with the support of an inspiring group of donors and supporters come together to get them launched.”

Why Audacity is Hard

Audacious projects are often proposed by daring individuals who would otherwise have little access to capital and influence—including getting one million girls into school classrooms, restructuring the debt of island nations, and scrubbing child sexual abuse from the Internet. We love both the spirit and the substance of The Audacious Project, but there’s a subtext to it that bothers us — which is that The Audacious Project is necessary because the work it funds and develops is too risky for companies to take on.

Talk about a missed opportunity.

More than at any time in history, companies big and small have the power to change the world.

If you could find a way to mobilize Amazon, Wal-Mart, Samsung, ExxonMobil, Daimler-Benz, The Walt Disney Corporation, and about a dozen other corporate titans, and get them more focused on solving real problems than maximizing shareholder value, we’d be well on our way to solving everything from climate change to global hunger, with some time left over to go shopping.

Instead, we’re left with a handful of noble young companies—Patagonia, TOMS, Shady Ray’s, Bombas and so on—that try to do well by doing good, but their efforts amount to a tiny drop in a very big bucket. They have nothing to lose, so why not be audacious? If you’re a big corporation with lots of stakeholders, the mantra is different. Too risky.

Risk is why small startups innovate rings around their giant competitors, like thread-toting Lilliputians running between Gulliver’s ponderous legs.

Risk is something to be avoided when possible, minimized when not, and mitigated in all cases.

Why Small Companies are More Audacious

Small companies have to do audacious things because that’s how they stay alive and grow. But if you’re in the Fortune 500? No thank you. You take predictability with your scotch and soda.

That’s one hundred percent backwards, and it’s why so many old-guard companies like Hilton are having their lunch money taken by upstarts like Airbnb and VRBO. (Remember, the Lilliputians eventually tied the giant Gulliver to the ground.) They’re weighted down by a potentially fatal misunderstanding of what risk and audacity are:

  • It’s not risky to do something audacious and potentially dangerous.
  • Real risk occurs when you play it so safe that you never attempt moonshots.

Simply, not taking risks is risky. That’s it.

Innovation, change and growth occur out on the edge, far from the safety of the home office.

They happen when programmers and designers and marketers and VCs are at their best, working without a net on initiatives that matter to them. They’re making up solutions as they go, shattering norms, and inventing things that no one knew were necessary…until the moment they were necessary.

What are they not doing? Thinking about what they have to lose. The minute you do that, it’s game over.

You stop thinking about creating the next big thing or breaking ground nobody else has ever broken and start worrying about safeguarding your hoard. As any gambler can tell you, that’s a sure way to end up standing out on the Las Vegas Strip at three in the morning, your pockets empty, wondering what the hell just happened.

Professional gamblers know that not taking risks—“playing not to lose”—is the same as losing.

Risk Correlates to Reward

After all, anyone in business or finance knows the simple equation of investing, right? Risk correlates to reward. The higher your potential to lose everything, the higher your potential return, too. That’s why investing in options pays a higher return than buying super-safe but boring Treasury bonds.

Gamblers (and smart CEOs) know that as soon as you start worrying about protecting your chip stack, you lose your audacious Han-Solo-in-the-asteroid-field moxie. You start playing it safe. You get conservative and careful and lose your edge. The psychological mechanisms behind this, part of the discipline of behavioral economics, are the hot hand fallacy and recency bias. Both will crush you at the roulette wheel and in the corporate board room.

People who believe the hot hand fallacy think that because you won in the past, you will keep winning, so you change nothing but keep betting. But most of the time, past performance has nothing to do with future results, so you’re betting on blind luck. Eventually, luck turns.

If you’ve been running your company conservatively and cautiously while believing that you’re winning because you’re just so amazingly awesome, you’ll get run over by the first competitor with a product better than yours.

Gamblers also avoid recency bias, which tells us that what’s happened to us most recently is the most relevant and therefore, the most likely to continue. You’ve been getting great cards on the flop? Well, then, you’ll always get great cards on the flop. You have no competitors in your space? Then you never will.

Recency bias is delusional, but if you buy into it, you’ll remain at the status quo until it’s too late.

Amazon CEO Jeff Bezos hasn’t fallen victim to either problem, and that’s probably why he’s built the world’s most important retailer and become the world’s richest man.

Back in 2003, Bezos and his leadership team realized that in making Amazon as efficient as possible, they had become really good at running reliable, scalable, cost-effective data centers. Of course, cloud infrastructure as a service wasn’t Amazon’s core business, and we suspect that about 95% of CEOs would have uttered the death knell, “We’re not in that business,” and killed the idea before it ever got out of diapers.

Bezos didn’t. He and his team recognized a terrible, risky, stupid, insanely great idea when they saw it and in 2006 launched Amazon Web Services. Today, that outgrowth of the infrastructure management that Amazon was already engaged in anyway is a $15 billion enterprise on its own, born out of the realization that assuming you’ll always be on top is a great way of ensuring that very soon you won’t be on top.

So, if taking risks is the least risky thing you can do, and not taking risks is the biggest threat to your business, how can you move forward in this turvy-topsy world?

Find Your Audacious Spirit.

Audacity is one of the key Virtues of the Rare Breed, the people whose so-called vices are actually their biggest strengths. Audacious people dare what others won’t. They enjoy making jaws drop by doing what most folks assume can’t be done. If you had that in your past but have shelved it to play the corporate game of “Careful, careful, not too fast,” it’s time to throw caution to the wind. Remember when you had nothing to lose and would try anything? That’s the version of yourself to drag out of mothballs.

Articulate a Strategy.

If you lead or work for a large organization, you know that risk-taking probably isn’t in its DNA anymore. You have to coax it out, and you won’t do that with some yee-haw idea that’s all guts and no brains. It’s fine to ask your boss, team or board to back you on an initiative to solve fusion or create a decaf coffee that tastes like the real thing, but you’ll need strategies, timelines, budgets and persuasion to ease them into risk-taking. Create a strategic framework that shows your leadership team why going in this direction matters.

Bring the Numbers.

An outwardly crazy risk looks a lot less kooky when you can point to realistic figures and tell stockholders, “If we can build this, and debut it in Q3, we could dominate a market worth an estimated $120 billion.” While you’re at it, bring numbers breaking down costs, too.

Build a Ragtag Team of Like-minded Wackos.

No matter how great your idea or how persuasive you are, you will never win over everyone. You might not even win over a majority. Fear of risk is a plague in corporate America, and that’s not likely to change. So recruit. Find bold, brave, creative people who like breaking stuff and build your guerilla squad. Then stop listening to the people who tell you what can’t be done and starting redefining what can be done.

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