Achilles had warned us
Nearly three thousand years ago, Homer was already posing one of the most modern questions imaginable.
In Book IX of the Iliad, Achilles explains that he faces two destinies. If he returns home, he will enjoy a long life, but his glory will disappear. If he stays before Troy and continues fighting, he will never return, but his fame will outlive him.
Achilles’ choice is therefore not simply between glory and happiness.
It is between a relatively predictable future and an uncertain future whose potential is immense, but whose price may be equally great. (Perseus Digital Library https://www.perseus.tufts.edu/hopper/text?doc=Perseus%3Atext%3A1999.01.0217%3Abook%3D9&utm_source=chatgpt.com)
This may be the oldest definition of what we now call risk-taking.
Starting a business, investing, conquering a market, launching an innovation, taking a company international, changing careers or simply deciding to pursue an ambition when one could stop: each of these decisions contains a miniature version of Achilles’ dilemma.
We like to tell stories of success in terms of courage.
We speak much less often about threats.
Yet risk and threat are not synonymous.
Risk is what we agree to expose in order to gain something. A threat is what can destroy part of what we already possess.
The entrepreneur’s entire challenge lies precisely in preventing the former from becoming the latter.
Risk is not uncertainty
One of the fundamental distinctions comes from the economist Frank Knight.
In Risk, Uncertainty and Profit, published in 1921, Knight distinguishes risk, to which probabilities can at least theoretically be assigned, from true uncertainty, in which the probabilities themselves are unknown. (The Library of Congress https://www.loc.gov/item/21018354/?utm_source=chatgpt.com)
This distinction is fundamental for entrepreneurs.
A company almost never operates in a world where all possible outcomes are known.
It operates in an environment where a new competitor, a disruptive technology, a geopolitical crisis, a regulatory change, a supply disruption, the loss of a strategic customer, a sudden rise in financing costs or simply a market reaction nobody anticipated may emerge.
Entrepreneurs therefore do not merely take risks.
They make decisions under uncertainty.
That is much more difficult.
Because with conventional risk, calculation is possible.
With uncertainty, imagination is required.
And this is precisely where the first threat emerges: we are much less rational than we believe when imagining the future.
The first threat is often internal
Daniel Kahneman and Amos Tversky profoundly transformed our understanding of decision-making.
Their Prospect Theory shows, in particular, that our behaviour towards risk changes depending on whether we perceive a situation as a gain or a loss. We do not treat the two symmetrically. In some loss situations, we even become more willing to take risks to try to avoid a definitive loss. (Rankless https://www.rankless.org/hit-papers/10.2307/1914185?utm_source=chatgpt.com)
For a business leader, this observation is troubling.
A company in difficulty may take greater risks precisely because it is in difficulty.
An entrepreneur may put in more money because they refuse to acknowledge the loss of the previous investment.
A leader may retain a product because they have spent three years developing it.
A company may pursue an acquisition that is going badly because abandoning it would mean publicly acknowledging a mistake.
Barry Staw identified this phenomenon as early as 1976 in his work on escalation of commitment: negative consequences can lead a decision-maker, particularly when they feel personally responsible for the initial decision, to commit still more resources to the course already chosen. (ScienceDirect https://www.sciencedirect.com/science/article/pii/0030507376900052?utm_source=chatgpt.com)
This is one of the paradoxes of entrepreneurial risk:
the more we have invested, the harder it may become psychologically to stop, even when rational analysis would sometimes tell us to do so.
The threat is then no longer solely external.
It comes from our inability to let go.
Courage and overconfidence are close neighbours
Entrepreneurship probably requires a form of optimism.
One must believe that a product that does not exist will find customers who have not yet asked anything of a company that sometimes has neither reputation, money nor organisation.
Without this ability to believe in something before the evidence is assembled, a considerable share of innovation would probably never exist.
But the quality that makes it possible to begin can become the flaw that prevents us from seeing danger.
A meta-analysis of 62 studies on entrepreneurial overconfidence shows a particularly interesting relationship: certain forms of overconfidence encourage positive opportunity assessment, business creation and innovation, but can subsequently impair performance at later stages. (ScienceDirect https://www.sciencedirect.com/science/article/abs/pii/S0883902622000192?utm_source=chatgpt.com)
Other research also shows that subjective perceptions of one’s own skills play a major role in the propensity to become an entrepreneur. (ScienceDirect https://www.sciencedirect.com/science/article/pii/S0167487006001024?utm_source=chatgpt.com)
This is an extremely fine line.
One needs enough confidence to act despite uncertainty.
But not so much that uncertainty is taken as proof that one is right and everyone else is wrong.
Entrepreneurs must therefore live with a permanent paradox:
having enough confidence in themselves to move forward and enough humility to consider that they might be wrong.
We naturally overestimate the scenario we want to happen
Dan Lovallo and Daniel Kahneman described another trap: the planning fallacy, the tendency to view a project from the inside and underestimate costs, lead times, difficulties and risks while overestimating expected benefits.
They propose, in particular, complementing this internal perspective with an “outside view”: looking at what actually happened to comparable projects rather than treating every new venture as exceptional. (hbr.org https://hbr.org/2003/07/delusions-of-success-how-optimism-undermines-executives-decisions?utm_source=chatgpt.com)
This is a particularly important discipline for entrepreneurs.
Ask:
“Why will my project succeed?”
and your brain will produce a story.
Ask instead:
“Out of a hundred companies comparable to mine, how many succeeded, and why did the others fail?”
You then begin to produce an analysis.
The difference seems subtle.
It is enormous.
US Bureau of Labor Statistics data also show that the disappearance of new businesses over the years is by no means marginal. Depending on the cohorts observed, around 20 % of establishments already fail to make it beyond their first year, and attrition continues thereafter. (Bureau of Labor Statistics https://www.bls.gov/bdm/entrepreneurship/bdm_chart3.htm?utm_source=chatgpt.com)
This does not mean that people should not start businesses.
It means that entrepreneurs must never confuse the possibility of success with its probability.
Acceptable risk is not maximum risk
Our entrepreneurial culture sometimes perpetuates a dangerous confusion.
The more someone risks, the more courageous they are said to be.
The more they sacrifice, the greater their ambition is said to be.
The more of their assets, time, reputation and health they commit to their project, the more determination they are said to demonstrate.
This is a poor definition of courage.
Taking an enormous risk is not necessarily courageous. It may simply be reckless.
Saras Sarasvathy and other researchers developed a much more interesting idea: affordable loss, the loss one can accept.
Instead of beginning by asking:
“How much can I gain if this works?”
the entrepreneur asks:
“What can I afford to lose if this fails?”
The idea is not to eliminate risk. It is to determine in advance how much capital, time, reputation or other resources can be exposed without jeopardising the whole. (DOI https://doi.org/10.1002/sej.66?utm_source=chatgpt.com)
This is a radically different philosophy.
Bad risk threatens your ability to play again.
Good risk allows you to lose a round without losing the game.
Survival is a strategy
There is much talk of maximisation.
Growth, valuation, market share, returns and impact should supposedly all be maximised.
There is less talk of survival.
Yet in a deeply uncertain environment, surviving long enough is already a strategic advantage.
This is where the idea of a real option becomes interesting.
An entrepreneurial decision does not always need to be made all at once. One can invest progressively, wait for certain information, define milestones and retain the possibility of stopping.
The literature on entrepreneurial financing specifically shows the value of staged investments: they allow new capital commitments to be conditional on information obtained in earlier phases and, in some models, allow projects with insufficient initial results to be abandoned. (ScienceDirect https://www.sciencedirect.com/science/article/pii/S0883902607000808?utm_source=chatgpt.com)
In other words:
the right strategy towards risk is not necessarily to choose between moving forward and giving up. It may consist of moving forward reversibly.
This is an essential difference.
Because what makes some decisions dangerous is not their boldness.
It is their irreversibility.
Threats thrive on complexity
As a company grows, a silent transformation takes place.
Initially, risks are relatively visible.
A few customers.
A few employees.
A few suppliers.
A few major decisions.
Then the organisation becomes a system.
Dependencies multiply.
Finance, cybersecurity, supply chains, regulation, reputation, human resources, technology, partners, investors, customers and subcontractors become interdependent.
In his theory of Normal Accidents, Charles Perrow showed that complex, tightly coupled systems can produce accidents that do not necessarily result from a spectacular error. They can emerge from the unforeseen interaction of several small failures. (JSTOR https://www.jstor.org/stable/j.ctt7srgf?utm_source=chatgpt.com)
This is an important lesson for contemporary companies.
A catastrophe rarely begins with a sign saying “catastrophe”.
It begins with a delay.
An exception.
A postponed check.
An employee who does not dare speak up.
A debt that is refinanced.
A customer who has become too important.
A supplier without an alternative.
An ignored IT alert.
A quality problem considered isolated.
Then dependencies do their work.
The small incident becomes systemic.
Under threat, we sometimes become less able to see the threat
Here is another paradox.
One might think that a threatened company automatically becomes more attentive.
That is not always the case.
The classic work of Staw, Sandelands and Dutton on threat-rigidity shows that a threatening situation can lead to restricted information processing and increased concentration of control. (JSTOR https://www.jstor.org/stable/2392337?origin=crossref&trk=article-ssr-frontend-pulse_little-text-block&utm_source=chatgpt.com)
This can be useful when immediate action is required.
But it can also become dangerous.
An anxious organisation centralises.
It reduces dissent.
It seeks certainty.
It listens more to the leader.
It experiments less.
It returns to behaviours it already knows.
Yet a new crisis sometimes requires precisely the opposite.
A threat can therefore create the intellectual conditions that prevent it from being understood.
Stress also changes decision-making
A leader is not an analytical machine independent of their physical and psychological state.
A meta-analysis of the effects of stress on decisions under uncertainty concludes that stress can impair decision-making performance, with effects depending in particular on the decision context. (PubMed https://pubmed.ncbi.nlm.nih.gov/27213236/?utm_source=chatgpt.com)
This deserves to be considered alongside the entrepreneurial question.
Leaders sometimes make their most important decisions precisely when they face the worst conditions for making them:
when cash flow tightens;
when an investor withdraws;
when a customer threatens to leave;
when teams are waiting for an answer;
when nights grow shorter;
when every day brings a new emergency.
The World Health Organization defines occupational burnout in terms of exhaustion, increased mental distance from or cynicism towards work, and reduced professional efficacy, linked to chronic workplace stress that has not been successfully managed. (World Health Organization https://www.who.int/news/item/28-05-2019-burn-out-an-occupational-phenomenon-international-classification-of-diseases?trk=public_post_comment-text&utm_source=chatgpt.com)
There is therefore a risk entrepreneurs rarely consider when mapping threats:
the decision-maker can themselves become a vulnerability in the system.
Some risks appear in no business plan
An entrepreneurial venture exposes far more than capital.
It exposes time.
Energy.
Relationships.
A reputation.
A family.
An identity.
This may be one of the most important limitations of our usual way of calculating risk.
We know how to build a financial scenario with optimistic, central and pessimistic assumptions.
But how do we value three years of life?
How do we value a weakened family relationship?
How do we enter accumulated fatigue into Excel?
How do we value the inability to be mentally present elsewhere?
Research on entrepreneurial failure shows precisely that its consequences can extend well beyond the company and interact with family life. (ScienceDirect https://www.sciencedirect.com/org/science/article/pii/S1044406820000101?utm_source=chatgpt.com)
Dean Shepherd also studied the grief associated with business failure and how this emotional response can itself complicate learning from failure. (Academy of Management Journals https://journals.aom.org/doi/10.5465/AMR.2003.9416377?utm_source=chatgpt.com)
An entrepreneur’s actual risk exposure therefore exceeds the amount recorded as share capital.
Prestige is also a risk
Finally, there is a more discreet threat.
That of beginning to protect one’s persona rather than one’s company.
The more visible an entrepreneur becomes, the more costly acknowledging an error becomes.
They no longer defend only a strategy.
They defend what they have publicly asserted.
Their status.
Their narrative.
Their reputation as a visionary.
Their promises to investors.
The image they have built before their employees.
It is precisely in these situations that escalation of commitment becomes dangerous. (ScienceDirect https://www.sciencedirect.com/science/article/pii/0030507376900052?utm_source=chatgpt.com)
Resources are added not because new information justifies the investment, but because giving up would mean acknowledging that the previous investment was a mistake.
This is when glory becomes a threat.
When saving the leader’s image becomes more important than saving the organisation.
Imagining failure before it happens
How can this be countered?
Gary Klein popularised a particularly simple technique: the premortem.
Before launching a project, the team imagines that several months or years have passed and that the project has failed completely.
Then everyone must answer:
“What happened?”
The exercise profoundly changes the conversation.
Employees are no longer asked to criticise the leader’s project directly.
They are asked to explain an imaginary failure.
Objections become easier to express. Weak signals emerge. Uncomfortable scenarios become discussable. (hbr.org https://hbr.org/archive-toc/BR0709?utm_source=chatgpt.com)
The premortem rests on an extraordinarily simple idea:
before taking a risk, give a voice to those who already see the threat.
The safest organisations do not assume everything is safe
Karl Weick and Kathleen Sutcliffe studied so-called high-reliability organisations: systems operating in environments where errors can have considerable consequences.
One of their lessons is counterintuitive.
Resilient organisations are not those that spend their time convincing themselves everything is fine.
On the contrary, they pay particular attention to failures, anomalies and weak signals. They avoid simplifying problems too quickly, remain attentive to actual operations and seek to develop their capacity for resilience. (Wiley Online Library https://onlinelibrary.wiley.com/doi/10.1002/9781119175834.ch09?utm_source=chatgpt.com)
In other words:
true confidence is not the absence of doubt.
It is an organisation’s ability to let doubt circulate without paralysing action.
Risk is therefore not the enemy
It would be easy to reach a cautious conclusion: since there are so many threats, we should undertake less, invest less and protect what we possess.
That would miss the essential point.
Innovation involves uncertainty.
Creating involves exposure.
Leading involves deciding before knowing everything.
A company seeking to eliminate risk entirely would probably eliminate a large share of its opportunities along with it.
Research on overconfidence itself reveals this ambiguity: certain cognitive characteristics that increase risk-taking can also encourage entrepreneurial action and innovation. A large meta-analysis of executive overconfidence covering 199 studies also emphasises that its effects on performance are more complex than a simple “confidence equals danger” relationship. (Sage Journals https://journals.sagepub.com/doi/full/10.1177/01492063221110203?utm_source=chatgpt.com)
The relevant question is therefore not:
“How can we eliminate risk?”
But:
“Which risks are we prepared to take, what losses can we withstand, and which threats could prevent us from continuing?”
True courage: remaining able to choose
We then return to Achilles.
He knows the price of both paths.
That is what makes his choice tragic and powerful.
The contemporary problem may not be that we take too many risks.
It is that we sometimes take them without defining what we refuse to sacrifice.
Entrepreneurs should know their red lines before a crisis draws them in their place.
How much capital am I prepared to lose?
How much time?
What level of debt?
What dependence on a customer?
How much dilution?
What damage to my reputation?
What pressure on my teams?
What share of my personal life?
At what indicator must I stop?
What information could convince me I am wrong?
And above all:
what do I absolutely refuse to endanger, even to succeed?
Perhaps this is true risk management.
Not building a life without danger.
But deciding in advance what can be exposed and what must be protected.
Taking enough risks to make the exceptional possible, but never so many that a single failure permanently rules out what comes next.
Because the most important success may be neither happiness nor glory.
It is remaining free enough to be able to choose again tomorrow.
References and further reading
1. Homer, Iliad, Book IX: Achilles’ dilemma between nostos and kleos. 2. Knight, F. H. (1921), Risk, Uncertainty and Profit. 3. Kahneman, D. & Tversky, A. (1979), « Prospect Theory: An Analysis of Decision under Risk », Econometrica, 47(2), 263-291. 4. Tversky, A. & Kahneman, D. (1974), « Judgment under Uncertainty: Heuristics and Biases », Science. 5. Kahneman, D. (2011), Thinking, Fast and Slow. 6. Lovallo, D. & Kahneman, D. (2003), « Delusions of Success: How Optimism Undermines Executives’ Decisions », Harvard Business Review. 7. Staw, B. M. (1976), « Knee-deep in the Big Muddy: A Study of Escalating Commitment to a Chosen Course of Action », Organizational Behavior and Human Performance. 8. Staw, B. M., Sandelands, L. E. & Dutton, J. E. (1981), « Threat-Rigidity Effects in Organizational Behavior », Administrative Science Quarterly. 9. Klein, G. (2007), « Performing a Project Premortem », Harvard Business Review. 10. Perrow, C. (1984/1999), Normal Accidents: Living with High-Risk Technologies. 11. Weick, K. E. & Sutcliffe, K. M., Managing the Unexpected. 12. Sarasvathy, S. D. (2001), « Causation and Effectuation: Toward a Theoretical Shift from Economic Inevitability to Entrepreneurial Contingency », Academy of Management Review. 13. Dew, N., Sarasvathy, S., Read, S. & Wiltbank, R. (2009), « Affordable Loss: Behavioral Economic Aspects of the Plunge Decision », Strategic Entrepreneurship Journal. 14. O’Brien, J., Folta, T. & Johnson, D. (2003), research on real options and entrepreneurial entry under uncertainty. 15. Dahiya, S. & Ray, K. (2012), « Staged Investments in Entrepreneurial Financing », Journal of Corporate Finance. 16. Lukas, E., Mölls, S. & Welling, A. (2016), research on staged VC financing under uncertainty. 17. Kraft, P. S., Günther, C., Kammerlander, N. H. & Lampe, J. (2022), « Overconfidence and Entrepreneurship », Journal of Business Venturing. 18. Koellinger, P., Minniti, M. & Schade, C. (2007), « I Think I Can, I Think I Can: Overconfidence and Entrepreneurial Behavior », Journal of Economic Psychology. 19. Forbes, D. P. (2005), « Are Some Entrepreneurs More Overconfident Than Others? », Journal of Business Venturing. 20. Burkhard, B. et al. (2022/2023), « Nothing Ventured, Nothing Gained: A Meta-Analysis of CEO Overconfidence, Strategic Risk Taking, and Performance », Journal of Management. 21. Shepherd, D. A. (2003), « Learning from Business Failure: Propositions of Grief Recovery for the Self-Employed », Academy of Management Review. 22. Edmondson, A. C. (2011), « Strategies for Learning from Failure », Harvard Business Review. 23. Edmondson, A. C. (2019), The Fearless Organization. 24. World Health Organization, ICD-11, research and definition concerning occupational burnout. 25. Starcke, K. & Brand, M. (2016), meta-analysis of the effects of stress on decisions under uncertainty. 26. Taleb, N. N. (2007), The Black Swan. 27. Taleb, N. N. (2012), Antifragile. 28. Taleb, N. N. (2018), Skin in the Game. 29. March, J. G. & Shapira, Z. (1987), « Managerial Perspectives on Risk and Risk Taking », Management Science. 30. Sitkin, S. B. & Pablo, A. L. (1992), « Reconceptualizing the Determinants of Risk Behavior », Academy of Management Review. 31. Busenitz, L. W. & Barney, J. B. (1997), research on entrepreneurs’ cognitive biases and heuristics, Journal of Business Venturing. 32. Cooper, A. C., Woo, C. Y. & Dunkelberg, W. C. (1988), research on entrepreneurial perceptions of the probability of success. 33. Hayward, M. L. A., Shepherd, D. A. & Griffin, D. (2006), research on entrepreneurial hubris and overconfidence. 34. BLS: U.S. Bureau of Labor Statistics, Entrepreneurship and the U.S. Economy, longitudinal data on establishment survival. 35. Simon, H. A. (1955), foundational research on bounded rationality and decision-making. 36. March, J. G. (1991), « Exploration and Exploitation in Organizational Learning », Organization Science. 37. Reason, J. (1990), Human Error. 38. Christensen, C. M. (1997), The Innovator’s Dilemma. 39. Schumpeter, J. A. (1934), The Theory of Economic Development. 40. Knight, F. H., Kahneman, D., Tversky, A., Sarasvathy, S. and Taleb, N. N.: a body of research distinguishing probabilistic risk, uncertainty, decision-making biases, affordable loss and exposure to extreme events.
