risk taking

In his IPO letter to potential investors, Zuckerberg stated 5 principles that have guided Facebook. These apply to any entrepreneurial business. I suggest you read these and ask how you can apply them to your own business.

The two that the most small business owners neglect are “Move fast” and “Be bold.” Too often we limit ourselves to growing organically, perhaps for fear of going into debt, and thus move slowly and timidly. Then we watch others pass us by.

Focus on Impact

If we want to have the biggest impact, the best way to do this is to make sure we always focus on solving the most important problems. It sounds simple, but we think most companies do this poorly and waste a lot of time. We expect everyone at Facebook to be good at finding the biggest problems to work on.

Move Fast

Moving fast enables us to build more things and learn faster. However, as most companies grow, they slow down too much because they’re more afraid of making mistakes than they are of losing opportunities by moving too slowly. We have a saying: “Move fast and break things.” The idea is that if you never break anything, you’re probably not moving fast enough.

Be Bold

Building great things means taking risks. This can be scary and prevents most companies from doing the bold things they should. However, in a world that’s changing so quickly, you’re guaranteed to fail if you don’t take any risks. We have another saying: “The riskiest thing is to take no risks.” We encourage everyone to make bold decisions, even if that means being wrong some of the time.

Be Open

We believe that a more open world is a better world because people with more information can make better decisions and have a greater impact. That goes for running our company as well. We work hard to make sure everyone at Facebook has access to as much information as possible about every part of the company so they can make the best decisions and have the greatest impact.

Build Social Value

Once again, Facebook exists to make the world more open and connected, and not just to build a company. We expect everyone at Facebook to focus every day on how to build real value for the world in everything they do.

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My answer to LinkedIn question by Terrell L. McTyer

If you are a small player, say a consultant or other solopreneur, you’d better steer clear of “meaningless innovations,” because they could pull you under.

I’ve done a talk to consultants’ groups called “Innovate or Die,” where I stress how important it is to make sure that your efforts at innovation are well-targeted, and that you know how to market them once created. Not all of us can afford to bet the farm on a potential “disruptive innovation” that turns “meaningless” when nobody buys it.

TMcT: “But don’t you have to take risks to make it big?”

Yes, you have to take risks, but how big and with whose money? Entrepreneurs take PRUDENT risks. Two things:

— There’s a risk/reward calculation. The bigger the potential reward, the greater risk is justified. BUT it’s easy to fool yourself. “This is foolproof. We have no competitors.” I just lost $25k investing in one of these.

— OPM. This is why we have VCs and angels. They can afford to lose your investment. Of course, their price is high.

— There’s an absolute ceiling on risk you should take. Despite the image of the “all in” player, are you going to bet your own house? Your kids’ college funds?

Maybe you will. I know many who have. Some lost, and they started over. Or the wife went back to work. (Why is it that men are more likely to bet the farm than are women entrepreneurs?)

I guess the biggest error is not going for it due to fear of the above. You regret it forever.

The second biggest error is going for it, but NOT going in big and fast. Prudent, organic investment in innovation, then your better capitalized competitors whiz past you, leaving you stunted. This has happened to me.

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