Malcolm Gladwell has a knack for distilling interesting observations and drawing bold conclusions.

He's at it again in a fresh New Yorker piece. In it, Gladwell argues that successful entrepreneurs aren't really the prolific risk-takers they're made out to be. What are they? They're predators who pinpoint opportunity and swoop in just when the time is right.

In his article, he points to two billionaires: media mogul Ted Turner and hedge fund superstar John Paulson. As Gladwell sees it, both have spotted opportunities and seized them. And they did so with minimal risk. Gladwell cites research by two academics who argue in their book, From Predators to Icons: Exposing the Myth of the Business Hero, that "rather than being risk-takers, those who are most successful in business are risk-minimizers". Gladwell's translation: "many entrepreneurs take plenty of risks—but those are generally the failed entrepreneurs".

It's an interesting notion and there's definitely some truth to it, especially when it comes to Gladwell's observation that "failed entrepreneurs tend to be wildly undercapitalized". Indeed, many entrepreneurs incur significant personal financial risk but vastly underestimate the amount of capital they truly need to execute against their plans. So despite the financial risks they take, they still don't have enough to get to where they need to go and inevitably fail trying.

But before we start thinking of successful entrepreneurs as lions, there's a problem: Gladwell and the university researchers he cites are looking at a handful of world-famous 'entrepreneurs'. Ted Turner and John Paulson, who figure prominently in Gladwell's article, have the advantage of something Gladwell seems to ignore: leverage.

If anything, Gladwell would have more success arguing "the rich get richer" than he has trying to suggest that there's a "sure thing" in an area of life (business) in which there is no such thing. Ted Turner inherited a multi-million dollar business from his father and leveraged his inherited wealth to build his media empire. John Paulson was already a Wall Street millionaire when he started his own hedge fund. And he gets to leverage over $35bn of other people's money.

None of this is to say that the Ted Turners and John Paulsons of the world don't deserve credit for what they've done, or that they haven't done a fantastic job spotting profitable opportunities and minimizing their execution risks. But their big successes have far more to do with the fact that they were in a position to leverage their existing resources to seize even bigger opportunities. Unfortunately, the average entrepreneur doesn't have much leverage, at least when he's getting started. If you aren't left a small fortune or aren't already wealthy, you have to begin somewhere.

And that typical somewhere is where the risk comes in. There are plenty of now-successful entrepreneurs who took out a loan, put their assets on the line or quit a great job to start a new business. Not all of them are the billionaires Gladwell is looking at, but to deny that they are examples of successful entrepreneurs is just downright silly. They did take on risk, and they did incur significant opportunity cost. Nothing they pursued was a "sure thing".

Perhaps a distinction needs to be made: entrepreneurs and businessmen are not the same people. An entrepreneur is the lion cub who may grow into a lion if he avoids predators and gets enough food. The businessman is the lion who spends his days protecting the pride and picking off feeble prey. For the former, relatively small risks can come at a huge cost, while for the latter relatively large risks can be managed with relatively little cost.

In the final analysis, many entrepreneurs do bite off more than they can chew. But the very best leverage their successes, and the capital that comes with them, to generate even bigger successes. Gladwell seems happy to ignore the risks incurred acquiring those early successes and instead gawks at the fruit they eventually bear years later.

Photo credit: Kjunstorm via Flickr.

Patricio Robles

Published 14 January, 2010 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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Comments (6)

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Stephen Palmer

Gladwell's observation is nothing new, and I think the "predator" label is misguided and misleading, since paints a negative connotation of entrepreneurs, who serve society by making things better, cheaper, more efficient, etc..

Drucker spoke of this long before Gladwell in Innovation & Entrepreneurship:

"A year or two ago I attended a university symposium on entrepreneurship at which a number of psychologists spoke. Although their papers disagreed on everything else, they all talked of an 'entrepreneurial personality,' which was characterized by a 'propensity for risk-taking.'

"A well-known and successful innovator and entrepreneur who had built a process-based innovation into a substantial worldwide business in the space of twenty-five years was then asked to comment. He said: 'I find myself baffled by your papers. I think I know as many successful innovators and entrepreneurs as anyone, beginning with myself. I have never come across an 'entrepreneurial personality.' The successful ones I know all have, however, one thing--and only one thing--in common: they are not 'risk-takers.' They try to define the risks they have to take and to minimize them as much as possible. Otherwise none of us could have succeeded. As for myself, if I had wanted to be a risk-taker, I would have gone into real estate or commodity trading, or I would have become the professional painter my mother wanted me to be.'

"This jibes with my own experience. I, too, know a good many successful innovators and entrepreneurs. Not one of them has a 'propensity for risk-taking.'"

over 8 years ago

Patricio Robles

Patricio Robles, Tech Reporter at Econsultancy


Great comment. I think, however, that asking entrepreneurs to define the level of risk they take can be problematic.

There's relative risk and absolute risk. For obvious reasons, successful entrepreneurs need to manage the relative risks well. But when you're an entrepreneur, there's a level of absolute risk that can't be controlled, and I think a lot of entrepreneurs ignore that. This absolute risk comes from engaging in an activity that is pretty risky (starting your own business). Why is it risky? Well, to start, most new businesses don't succeed and significant opportunity cost is incurred when you set out on your own.

I think a big problem has to do with the definition of risk-taker. It has a bad connotation that implies haphazard decision-making. But that's not really what risk-taking is.

In my opinion, entrepreneurship is akin to skydiving. Skydiving is an inherently risky activity (somebody jumping out of an airplane takes on more risk than someone who doesn't) but a lot of risk can be minimized with training, safety, etc. Skydivers are risk-takers but it doesn't mean they're crazy or negligent.

over 8 years ago



This article makes a poignant point - it is worth considering the advantage/leverage (for instance inherited wealth) that these so-called predators start off with. It would also be interesting to know how many false starts they had, but that their leverage allowed them to survive and that would have finished off the average entrepreneur who genuinely takes a risk.

I don't mean to diminish the achievements of the predators, I however feel it takes more balls to venture into business when the consequences of failure are higher, as opposed to when failure mean losing an insignificant fraction of inherited wealth.

over 8 years ago


clay barham

Those who admire and criticize Ayn Rand’s beliefs about people standing on their own feet say she advocated selfishness, thereby greed.  That implies self-centered, like the arrogant left. It is anti-individual creativity, anti-entrepreneur, which is not Ayn Rand.  From her works, it is apparent Ayn Rand admired people who were courageous pebble-droppers, the nails standing above the boardwalk that ruling elite might trip over, who challenged the established and accepted way things were done.  They were outer- and other-centered visionaries and dreamers. This is reflected in a new book due soon on Amazon called SAVE PEBBLE DROPPERS & PROSPERITY, also on  She pitched for the entrepreneur, accomplished individuals and for individual freedom.  Only the leftists believe individuals are bad and community, led by them, is good.  They believe they are the elite who must rule and Ayn Rand opposed that.

over 8 years ago


Michelle Carvill

Some great points in the comments - and a well balanced response to Gladwell by Patricio.  Having entrepreneurial spirit, personality (call it what you will) does that really just focus on risk taking.  Surely not - there's calculated risk - and as Stephen Palmer mentioned above - it's more about 'not being a risk taker'.  I run my own business, I've invested in a couple of projects that I hope will do well - and will participate in implementing new ideas - I've got drive and energy - but am I risk taker or an opportunist?  I'm pretty careful about what I will and won't get involved in.  However, I don't have millions in the bank. so I have to be careful about what I participate in - there's no financial padding, which whilst I consider myself entrepreneurial, makes me more risk averse - as taking a hit is more painful without padding.  The rich, do get richer - money makes money - and the entrepreneurs cited by Gladwell already had immense wealth to play with.  They can take the hits - as it's not as painful. Surely, the financial padding gives you the freedom to be more entrepreneurial and take more risk.   

over 8 years ago


Jason Webb

This is a great business advice article. It covers all the aspects, I am thinking to relocate my business soon using a professional company and seeking new challenges for better success.

about 8 years ago

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