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.