Thursday, February 03, 2005

Entrepreneurship: Fools rush in where angels fear to tread 

If the Singapore government wants to encourage entrepreneurship, maybe it should try to make more Singaporeans overconfident of their abilities. Rob at the BusinessPundit points to an article in BusinessWeek entitled “Ego Makes Entrepreneurs?” which suggests that it’s not risk tolerance that separates entrepreneurs from the rest but “overconfidence in their ability”. Excerpt:

While conventional wisdom assumes entrepreneurs have great risk tolerance compared to the rest of us, in controlled experiments that tracked attitudes to risk, we consistently found that they aren't really that different. In some cases, they're even more risk averse [than the norm], and yet they continue to bear risk...

Entrepreneurs, like everybody else, hate uncontrollable risks, but on the other hand, they're overconfident in their own abilities -- they think they can control their abilities in a random drawing of people...

Entrepreneurs appear to be risk seeking with respect to their ability. For example, if there are two industries and one has a high cost of ability uncertainty and the other has a low cost of ability uncertainty, the entrepreneur will choose the first case because of his overconfidence.
Without looking at the study’s results in detail, I can’t be sure exactly how valid the conclusion is. It is intuitively attractive, though. Entrepreneurs are generally doers, and any trait that promotes action — and overconfidence obviously would — seems a natural fit with entrepreneurs, although of course, there will always be exceptions.

The conclusion does suggest that the government’s efforts to promote risk-taking among Singaporeans may not get the payback it hopes.

Government to be more open to extreme sports in Singapore
Thrill seekers in Singapore may have more avenues to leap, dive or climb in the future. Acting Community, Youth and Sports Minister Dr Vivian Balakrishnan says the government plans to take a more open approach towards extreme sports...as the government takes a renewed look at the possible benefits from risk management, which is part and parcel of any extreme sport... “What I am signalling now is a receptiveness to new ideas, new proposals for sports, even extreme sports which build up positive attitudes to risk taking in young Singaporeans, build up team spirit and ultimately, national spirit.” said Dr Vivian...
The key, rather, may be to habituate people to success. That would require them to spend most of their time doing things that they are good at.


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