In September 2000, the co-founders of Netflix offered to sell their company to the video store giant Blockbuster for $50 million — and were pretty much laughed out of the boardroom.
Executives of the Blockbuster empire, which was then valued at $5 billion, were so complacent and blinkered they saw Netflix as a risk not worth taking. Ten years later, Blockbuster filed for bankruptcy while Netflix was worth $13 billion (today, it’s worth nearly $300 billion).
One of Blockbuster’s executives is said to have acknowledged at the time that “management and vision are two separate things.”
Indeed.
Blockbuster was so busy running things day-to-day it didn’t think about tomorrow. By avoiding risk, executives were dooming their company.
According to a 2022 article in Built In, an online publication for start-ups, “Risk aversion takes on a life of its own in an organization. It shows up in procrastinating on decisions, overwhelming rejection of new ideas, overthinking decisions (sometimes called analysis paralysis), decisions made by committee and ideas flattened by an avalanche of questions, some relevant, some not.”
The article, aptly entitled “Risk Averse? You Might Be Doing More Harm Than Good,” goes on to say leaders should not only accept risk but celebrate failure.
For many people, that’s easier said than done because risk has to be one of the least understood concepts. We all know about risk and think we understand it. But frankly, we know more about what makes us afraid — and we often confuse fear with risk.
Fear prevents us from moving forward and is often irrational. For example, someone who is afraid of flying but needs to get from New York to Los Angeles might decide to drive, even though statistics clearly demonstrate the safest way to travel is on a commercial airline.
A fear of failure can also prevent us from taking risks. I see this a lot in my work as a community builder. I have worked with many communities where thoughtful leaders have talked about economic development strategies, marketing strategies and action plans to help their communities succeed and prosper.
The public often views these investments as risky propositions. Residents are afraid the investments will fail, money will be lost and the community will go bankrupt.
But in every one of those communities the reason for investing in development is that the downtown is dead, businesses are closing, housing prices are falling and the community is in a downward spiral.
The risk of doing something is not insignificant. But the risk of doing nothing is very significant.
We must not be so paralyzed by fear that we neglect our communities’ futures. We should draw lessons from our past — where, through a combination of optimism, pride and risk, we constructed iconic buildings in town squares that proclaimed confidence and fortitude.Â
I fear that, given the option today, too many of us would choose the cheapest, shoddiest and ugliest public building possible. We are afraid of investing money in the community for fear it won’t pay off.Â
But somehow we are not afraid of the inevitable consequences of failing to invest and having our communities die a slow and painful death.
A report from Federal Reserve Bank of Kansas City discovered that successful communities share a number of key attributes:
“Community controversy is accepted; schools have a major focus on academics, not sports; local people have combined enough financial resources to support some joint risk taking; people are willing to invest financial surplus in local private enterprises; people tax themselves to support local infrastructure; community is defined broadly and inclusively, rather than there being competition among smaller units,” the report said.
The report was published more than 20 years ago. But it still rings true today.
Residents must work together to find solutions — and that means taking risks together.
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