Take Intelligent Risks

The difference between a great career and a merely good one can come down to one simple thing: the willingness and ability to take intelligent risks. The same is true for companies. Those that coach their people to take intelligent risks will attract and inspire the most innovative employees and those employees will take their company to great heights.

My own professional journey started by taking a big risk. I was offered a job at a top Wall Street bank out of college which was a clear path to a certain future of financial success. At the last minute, however, I decided to abandon that path and headed instead to Costa Rica with a good friend where we ended up starting our own business in a little beach town (conveniently located near great surf). We got a crash course in being a small business owner and it went well enough that we sold the business to American investors a year or so later. That international entrepreneurial experience differentiated me from other candidates when I came back to the States to take the next steps in my career and started me on a path that would eventually lead to LinkedIn.

At LinkedIn, we aspire to be among the world’s greatest companies by fulfilling our vision of creating economic opportunity for every member of the global workforce. Risk-taking has been in our DNA since Reid Hoffman and his co-founders gathered in his living room in 2003 and took the leap to bring their vision to life. As we grew, we recorded our culture and our values in a document so that new employees could understand the original ethos – and improve upon it where possible. One of our six values is “Take Intelligent Risks.”

Today, taking intelligent risks is more important to us than ever. For our employees, it’s a critical part of their career development. For our company, intelligent risks are essential to realize our mission and vision. Because we put such high value on taking intelligent risks, we introduced a framework that enables our teams to be more mindful in identifying, evaluating, and taking these risks to propel themselves and the company forward. Here’s the framework that we use:

Evaluate upside to downside

Determine how much you stand to benefit in success and how much you could lose in failure. As Jeff Weiner often says, “look for opportunities where there is a disproportionate relationship between upside downside.” In success, you should benefit much more than you lose if you fail. In some cases where a more quantitative analysis is possible and you can be specific about the ratios, an intelligent risk should return at least 3x upside to downside. You may also find that your unique professional knowledge and expertise give you an information advantage when you assess an opportunity for its risk/return profile. Leveraging these moments of information advantage often yields the most compelling returns on a risk.

Consider expected outcome relative to cost

How likely is the upside scenario and how much will it cost to achieve it (in time, people, or dollars)? For example, a lottery ticket has a great ratio of upside to downside, but you’re so unlikely to win that its expected value is very low. Other business risks are more likely to be successful, but they can require so many resources to pursue that they might not be worth the cost, even in success. Lastly, remember to make sure that the win you’re playing for is big enough to matter. A common mistake here is to have the ratio of upside to downside work, and the expected outcome relative to cost make sense but the win is still too small to move the needle for your business. Whatever resources you manage- your own time, a team’s time, the company’s global budget- just make sure that when you win there will be material impact.

Seek balance

Too much risk or too little in your portfolio can lead to suboptimal outcomes. Remember to evaluate any potential risk in the practical light of your real life. An opportunity can have the right ratio of upside to downside and can have, in a vacuum, the right expected outcome relative to cost, but if you have a plate that is over flowing with big risks right now, you may be less likely to focus effectively on this one and therefore reduce your chances for success. Similarly, if you examine your risk portfolio and determine you don’t have enough risk, now might be the optimal time to take a well-considered big swing.

-Remember, you can also take on risk by doing nothing at all. The world isn’t standing still and other people are moving forward even when you are not. Standing still can expose you to more loss.

The majority of the most profound advancements in our business - and the biggest steps forward in my career - have been directly related to taking intelligent risks. I use this framework to help me make decisions about hiring, time management and resource allocation.

Using this framework, or any other, however, doesn’t guarantee success every time. No one who takes intelligent risks as part of their portfolio of actions wins all the time. I have failed many times in risks that I’ve taken at work and I know that I’ll fail periodically in the future. I’m thankful that LinkedIn has a culture that allows me to fail, and then to get up again and focus on my next play. Taking intelligent risks is hard work and can be scary, but the rewards from a risk well taken can be incredibly fulfilling.

What about you? Are you ready to take an intelligent risk?