Entrepreneur Manager Archetype

The entrepreneur archetype is about taking calculated risks and going towards your vision.  In investing taking risks can mean receiving a higher return on average than what you can get from safer investments like CDs..  Yet, there is a point in time where additional risk does not necessarily mean higher return.  A gambler can take calculated risks that pays off.  Yet, taking undue risks (betting it all on a bluff) may mean losing it all (by betting on an individual stock versus having diversified portfolio).  On the other hand, a conservatist who plays it too safe will lose out to inflation by putting his money underneath the mattress.  In life, a conservatist will play it safe with a 9 to 5 job and never pursue his dream.  A gambler will jump on the latest fad to make money, either winning big or losing big.  The balance is taking calculated risks where you understand the risks and do what can be done to minimize the negative outcomes.

Conservatist

A conservatist avoids taking risks due to a fear of failure.  In money terms, this means putting money underneath the mattress or in a safe CD.  In life terms, it is about not going the extra mile at work or, if single, taking the risk on going on a blind date.  Conservatists avoid situations where they may get hurt or may feel a sense of loss.  How many have stayed in a job that they did not like just because it paid the bills?  Avoiding a change to avoid a potential lose of income, can lead to a life of misery in  a dead end job. 

There are also many conservatists who are avoiding investing in the stock market after seeing the market collapse in 2000 to 2002.  They prefer a safe 4 percent investment return compared to the uncertainty of the stock market, even if they are investing for the long-term.  They make their decisions based on the worst case scenario versus what usually happens.  They overlook that the stock market has averaged over 10% annual return over the last 78 years and focus on the last few years.  They overlook that there is only one 10-year period that the stock market lost money and this was during the Great Depression where stocks fell initially but rebounded to almost the original value by the end of the 10 year period (only fell by 1 to 2% by the end of the period).

However, being a conservatist does have its advantages though.  By playing it safe, many conservatists avoided huge losses that others saw who were invested in technology stocks in the early-2000.  For those who are nearing retirement, being conservative and diversifing outside the stock market can be good (yet some stock investing is still wise per many experts).  Having a job that pays the bills is not a bad thing either.  Many have gone into debt by trying to start a business on their own.

Gambler

A gambler takes on large risks without the fear of failure.  In money terms, this means putting money into the newest and latest investment whether it is real estate, technology stock, lottery tickets or investment pyramids.    The game is not about what he needs to be comfortable, but having more than others (or more than what they currently have).  The gambler tries to win big and by doing so can lose big.  This can also be seen in quitting a job to start a business on their own because of the lure of getting rich by owning one's own business.  They may do this without looking at having a safety net such as an emergency fund before making the leap.  The risks that a gambler takes on can be more than what the payout justifies.  Thus, he can lose everything and need to declare bankruptcy.

Balance

There is a balance between a gambler and a conservatist.  Basically, to succeed everyone needs to be a bit of a gambler.  One needs to take risks in investing for retirement to achieve a reasonable return on investments to have enough money for retirement.  Also at work, many have shied away from making decisions because they are afraid of being wrong.  Yet, sometimes making a decision (taking risk) is better than taking no risk at all.

There is a parable about a successful CFO and decision making.  At the retirement party of the successful CFO, the new CFO was worried about being able to step into the shoes of his predecessor.  The new CFO ask for his advise.  The retiring CFO said "beans".  "Beans?" asked the new CFO.  "Yes, anytime that I had a yes or no decision and I did not know which way to go, I put my hand in my pocket and grabbed some beans.  If odd, the answer is yes.  If even, the answer is no."  replied the retiring CFO.  The morale is when faced with a decision, it is better to make a decision and sometimes you be right and others you will be wrong, but the worst decision is indecision.  So quite playing it safe and being in the background.  Take some chances and see what happens.

However, there are many who take too much risks in their lives without weighing the consequences of their decisions.  Many have claimed bankruptcy due to going without health care insurance or investing in a single stock (Enron, WorldCom, etc.).   Taking on too much risks of not having certain insurance (auto, term life and health insurance) or not diversifying investments can lead to financial success or financial failure.  It is better to be a little conservative and diversify your investments than bet all you have on a single bet.

The entrepreneur is about planning where to take risks and managing the risks.  Many go into business on their own without a well thought out business plan and adequate savings.  Others work for a company and enjoy the security of the paycheck.  They stay quiet and hope to hold onto their job until retirement.  The days of a 9 to 5 are over and those willing to step up and take risks are being rewarded by corporations.  Many entrepreneurs think they need to go into business on their own to get the freedom and rewards when they just need to look at opportunities where they are at. The old adage of needing to be in business for yourself to make money is not really true.  Just ask Jack Welch (the ex-CEO of GE).   Jack has made millions by working for corporation, probably more money than he would have made on his own.  For many it is safer to work for a corporation because there is a safety net when taking risks.  If you are self-employed, you are more dependent on the economy and your customers for your next meal.  Your income is less volatile when working for a corporation (even with the recent layoffs).  Yet, Jack Welch and others are only rewarded at a company when they take risks by taking on responsibilities.

So, there is a blend of taking risks while being conservative and having a safety net.  Other ways to blend taking a gamble while being conservative are:

• Starting a business at night and on the weekends while keeping a 9 to 5 job (if allowed by your current employer)

• Investing in a diversified portfolio (being conservative) while keeping a small portion of your money to investing in the latest hot stock tip

• Discussing with your boss how you can create opportunities in your job to be more independent

• Shifting your insurance to have larger deductibles or using catastrophic medical insurance (ability to spend less on insurance while being conservative in covering large losses)

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