While the OpenAI turmoil was happening over the weekend, I dug into Sam Altman’s archives. I read articles like How Things Get Done, How to Be Successful, and Startup Advice. Reading these posts, I noticed Sam writes a lot about risk, and specifically, that most things are not as risky as they seem.
I found that of his 111 posts, 34 or 30.63% comes up when you search for the word “risk”.
So I decided to read everything Sam has to say about risk on his blog. Below is what I learned.
Please note: I wanted to keep Sam Altman’s ideas in his own words, so most of the below is very lightly edited for brevity, if not directly quoted from his blog.
Most people think about risk the wrong way.
Why is taking risks important?
Because it’s impossible to be right all the time. You have to try many things and adapt quickly as you learn more. (How to Be Successful)
Most things are not as risky as they seem. (#45 in Startup Advice)
Starting a company is really not that risky – in general, few things are as risky as they seem. (Startups, Role Models, Risk, and Y Combinator)
Most people overestimate risk and underestimate reward. (How to Be Successful)
- From H5N1: “We seem to be wired to overweight the risk of the dramatic, scary, but very unlikely and underweight the risk of the mundane, familiar, and probable. We worry about terrorist attacks and necrotizing fasciitis, but not much about heart disease or car crashes. But in 2011, 17 US citizens worldwide died as a result of terrorism and approximately 150 from necrotizing fasciitis. There were nearly 600,000 deaths resulting from heart disease and over 32,000 from car crashes.”
- In another article, Advice for Ambitious 19 Year Olds, he talks about taking the right kind of risk. He says, “Staying in college seems like a non-risky path. However, getting nothing done for four of your most productive years is actually pretty risky. Starting a company that you’re in love with is the right kind of risk. Becoming employee number 50 at a company that still has a good chance of failure is the wrong kind of risk.”
If you buy into the idea that most of us think about risk the wrong way, I found five pieces advice on the right way to think about risk and how to take action on this knowledge.
Advice # 1 Make it easy to take risks.
In How to Be Successful, he gives four thoughts:
- Take risks early in your career. It’s often easier since you don’t have much to lose, and you potentially have a lot to gain. He repeats this in The days are long but the decades are short.
- Don’t save up for too long. “At YC, we’ve often noticed a problem with founders that have spent a lot of time working at Google or Facebook. When people get used to a comfortable life, a predictable job, and a reputation of succeeding at whatever they do, it gets very hard to leave that behind (and people have an incredible ability to always match their lifestyle to next year’s salary). Even if they do leave, the temptation to return is great. It’s easy—and human nature—to prioritize short-term gain and convenience over long-term fulfillment.”
- Keep your life cheap and flexible for as long as you can. This obviously comes with tradeoffs, but is a powerful way to follow your hunches and spend time on things that might turn out to be really interesting.
- Look for small bets you can make where you lose 1x if you’re wrong but make 100x if it works. Then make a bigger bet in that direction.
Advice # 2 Work super hard to not fall into the mimetic trap.
In How to Be Successful, Sam says that we will usually get risk calculations wrong. He writes, “You’ll be very focused on keeping up with other people and not falling behind in competitive games, even in the short term.”
He explains that most people are primarily externally driven, and that this is bad for at least two reasons. First is you will work on consensus ideas and on consensus career tracks, preventing you from doing truly interesting work. Second, you will usually get risk calculations wrong. You’ll be very focused on keeping up with other people and not falling behind in competitive games.
Most successful people he knows are primarily internally driven. They do what they do to impress themselves and because they feel compelled to make something happen in the world. Beyond a level of money and social status, this internal drive is the only force he knows of that will continue to drive you to higher levels of performance.
He gives the example of Jessica Livingston and Paul Graham.
Jessica Livingston and Paul Graham are my benchmarks for this. YC was widely mocked for the first few years, and almost no one thought it would be a big success when they first started. But they thought it would be great for the world if it worked, and they love helping people, and they were convinced their new model was better than the existing model.
I understood how being more internally than externally driven can lead to more success. But how does being externally driven relate to getting risk calculations wrong? I couldn't grasp it at first.
So I made this table and I think I got it.
Advice # 3: Aim to do something big, new, and risky every year in your personal and professional life.
This is #24 in The days are long but the decades are short, Sam’s 36 pieces of life advice he thought were worth passing on upon turning 30.
He writes, “Do new things often. This seems to be really important. Not only does doing new things seem to slow down the perception of time, increase happiness, and keep life interesting, but it seems to prevent people from calcifying in the ways that they think. Aim to do something big, new, and risky every year in your personal and professional life.”
Advice # 4: Think about upside risk, rather than downside risk.
In Upside risk, Sam talks about everyone claiming to understand the power law in angel investing, yet continuing to ask for onerous terms from founders to mitigate their ‘downside risk’.
His admonition: Instead of downside risk, more investors should think about upside risk—not getting to invest in the company that will provide the return everyone is looking for.
Advice # 5 Don’t worry so much - remember things in life are rarely as risky as they seem.
This is # 15 in The days are long but the decades are short.
“Don’t worry so much. Things in life are rarely as risky as they seem. Most people are too risk-averse, and so most advice is biased too much towards conservative paths.”
Beyond individuals and startups, Sam reflects on how risk relates to two macro topics.
How did the US manage to become the world’s largest economy without ever being the largest country by population? Sam writes in China that the secret is not genetics or something in their drinking water. It’s an environment that rewards risk-taking and radical thinking, minimizes impediments to doing new things, among other things.
Lastly, Sam writes that by freeing more people to take risks, [universal] basic income will unleash human potential. That’s one of the biggest reasons he’s excited about it. (How to Be Successful)
It was important for me to write about this because I took it for granted that I understood the concept of risk. The greater the risk, the greater the reward. The main thing is to mitigate risks.
But then, reading Sam write over and over again: Most people think about risk the wrong way. Most people will usually get risk calculations wrong. Most people have terrible intuition about risk/reward trade offs.
Was I missing something? When I think about risk, I think about courage. That, if I’m not willing to take a risk, then it means I don’t have enough courage. It’s a moral failing.
But what if risk taking is not just about courage? What if my thinking on risk has been faulty this whole time?
I’m not certain what the answer is, but I think it has something to do with short term vs long term. The downside is shorter term and more palpable, while the upside is longer term and more abstract.
The first big risk I ever took was in 2013. I quit my first job in order to start my own consulting business. People thought I was so brave. The truth is I only did it because I was deluded that I would be able to replace or even triple my salary within three months. If I didn’t believe that, I probably would not have quit. In reality, what happened was I earned near zero income in the next year.
However, that year was the most transformative year of my life. That was when I learned foundational skills like copywriting, sales, and networking. It’s when I built what are today still some of my most important relationships. It’s when I gained the experiences that gave me the confidence and resourcefulness that I have today.
But these are gains I couldn’t have imagined in 2013. If you told me then that quitting my job would lead to near zero income for a year, I never would have done it. Besides, the loss in income was so short term and so palpable, while the gain in learnings, relationships, and experience was so long term, so abstract.
So, what now? As a first step, I’m taking Nassim Nicholas Taleb’s advice, "You should study risk taking, not risk mitigation”.