Entrepreneurs are many things, but one thing that is common in many portrayals of them in popular culture is their acceptance of uncertainty, their courage in the face of risks, and their determination to overcome seemingly insurmountable obstacles.
It’s an enticing image, but as new research from Suffolk University reminds us, it may not be entirely accurate. The research finds that the huge uncertainty caused by events such as the COVID-19 pandemic has resulted in many would-be entrepreneurs adopting for a somewhat safer career path.
“There is so much happening in the world, one can’t help but think about events that are looming and large-scale, with enormous consequences that can impact our lives for decades,” the researchers say.
Blocking progress
The researchers differentiate these fears of “megacatastrophoes” from more general fears of failure or rejection as they can have a different impact on our decision making. They distinguished these catastrophies in six main ways:
- They tend to provide a degree of advanced warning
- They often unfold over a long timeframe
- The recover period is very long
- They have numerous primary causes
- The scope of impact is extensive
- A general lack of institutional support to aid preparation
Central to how major events impact our willingness to create new things is our psychological distance from the events. If we feel that the events are close to us then our risk aversion rises.
“When psychological distance is perceived as more distant, individuals develop high-level, abstract, and simple representations of future-distant events. Interestingly, when a future-distant event is perceived as more distal, individuals also experience lower emotional intensity associated with the event and are able to identify more positives, or ‘pros,’ connected with it,” the researchers say.
When events are viewed as looming large then we often seek to reduce our exposure to risk wherever possible, which is likely to result in a reduction in our entrepreneurial activity. Of course, such risk-aversion can grip salaried employees just as much as entrepreneurs, as the important point is the reluctance to engage in new things.
Overcoming the fear
The researchers highlight a number of public policies that can help us to overcome these fears. For instance, they advcoate positive communication from governments on how they will tackle the catastrophe and therefore aim to stymie any concerns that are rising within people.
Similarly, attempts should be made to address entrepreneurial inertia, with a clear emphasis on stoking the creative fires and provide incentives for innovation to flourish, all while building confidence in key institutions so that people can feel confident that the catastrophe is being successfully dealt with.
There are obvious benefits to encouraging creativity and innovation during crises, as it is often this creativity that is central to overcoming the challenges the crisis presents. Understanding the risk-aversion that the catastrophes are likely to invoke, however, may be a crucial first step in ensuring that innovation emerges.
