I like to think of myself as a rational person. Yes, I have emotions that muddle my choices, and I make mistakes on logic problems just like anyone else. But when I have big decisions to make in my life, I’d like to believe that I go with the facts.
Which is why the titular question makes me so uncomfortable.
My dream was to be an entrepreneur. I wanted to run my own online business. Years later, I would achieve that dream, but the odds of success certainly weren’t on my side.
I’d often heard the statistic that “80% of new businesses go bankrupt” and I had connected with many friends also trying to do the same thing, while very few were able to earn a living from it.
My dream was a high-variance profession. That means there were a few spectacular winners, a few more mediocre successes and tons of failures. Authors, musicians, actors, athletes and architects are other high-variance professions.
The problem is that pursuing such high-risk professions is often hard to rationally justify. I’ll explain why this is so, but I’ll conclude by sharing why I think you can still have hope even if your dream is hard to achieve, and some high-variance pursuits that are well worth pursuing.
Why Could “Following Your Dream” Be Irrational?
First, I’m going to admit that this is an uncomfortable subject for me, and probably one I would have had a strong aversion to when my current life was still just a fantasy. I don’t blame you if you’d want to reject the following analysis out of hand, but I think that would be unwise.
Instead, I think it’s better to understand the logic, so you can also adjust your course of action to avoid its pitfalls. Not all risks are unintelligent, so understanding what makes some risks stupid can help you avoid those traps in your own plans.
Problem #1: We Only See Winners
The first strike against high-variance professions is that we only see successes, not failures.
I’m a perfect example of this. I’ve been able to build a successful business selling courses on learning better, in large part because I’ve built a large audience. Statistically speaking, you’re much more likely to read me than someone who does not have a large audience.
But my advice is only one half of the story. You don’t hear from the many other writers who tried to set up a blog, but failed to gather any readers. They might paint a very different picture than myself on the relative merits of blogging, but their voice is silent.
Blogging is a clear example of this effect, but it is pervasive in most high-variance fields. We see George Clooney or Liam Neeson, not the masses of actors waiting tables in LA. We see Bill Gates and Mark Zuckerberg, not the start-ups who failed after investing everything.
The idea that “losers” can’t teach us anything is both wrong and dangerous. Those who failed at a pursuit may not give us sound advice for emulating success, but they at least understand the costs of their choice. You risk seeing only what you want to see if you focus only on success stories.
A rational approach to entering a high-variance profession would be to also seek out the people who failed. Ask them what they regret from their choice, and whether there were any side-effects (good or bad) from not making their dream. Before you commit to going forward you need to find a way to either avoid, or be able to stomach, the possible worst-case scenario.
Problem #2: Economics Isn’t On Our Side
Paul Graham defends the merit of startups. Sure, most startups will be wasteful, he argues, but a few will have tremendous impact. The expected value is therefore far higher than the typical result (or the typical person you see in Silicon Valley claiming to be an entrepreneur).
A weakness with this analysis, however, is that earning $100 million doesn’t give 100x more happiness than earning $1 million. Economists describe this effect by saying that the utility curves for wealth are not linear.
This has an unfortunate effect for the happiness of those pursuing high-variance professions. You can see this if you try to calculate the expected utility (utility is a fancy term that roughly means happiness or satisfaction) for pursuing a start up.
Let’s say, hypothetically, that your startup has a 90% chance to earn $0 and a 10% chance to earn $10 million dollars. Obviously this is a simplification, but the analysis extends to the case where there are more possible outcomes. For this case, we can therefore expect to earn $1 million dollars, on average.
Now, most of us would probably say that having $1 million dollars is a pretty good deal, maybe worth a few years of effort, even if it’s not a certain bet.
Unfortunately, that calculation is misguided. A better way of calculating it is to try to average, not the money, but your satisfaction. You’d definitely prefer $10 million to $1 million dollars, but it’s unlikely that you’d prefer it 10x as much. If we followed a square-root law common for utility curves, you’d only prefer it a little more than 3x as much.
Because of this, however, our expected satisfaction is quite a bit less. In terms of satisfaction, you’re only getting about a third of the satisfaction as you would have if the $1 million were a sure thing.
Paul Graham’s analysis is certainly correct on a societal scale, which I believe was his point—startups, in general, are valuable even if most are wasteful. However, the high variance of his profession does make it somewhat less attractive for a potential new entrepreneur worried about the happiness of his future choices.
Problem #3: Our Choices Influence Happiness Less Than We Think
One reason I wanted to pursue my dream was because I was convinced how happy it would make me. In looking back, it has made me very happy, but I doubt any reality could match the fantasy picture of success many people hold for their dreams.
Unfortunately this too doesn’t square exactly with the facts. Daniel Gilbert, in his excellent book, Stumbling on Happiness, notes that we overestimate the impact choices will have on our happiness. Great wins and great failures, he argues, have a smaller impact on happiness than we would otherwise believe.
This again places a strike against high-variance professions because the possible wins in terms of life satisfaction are smaller than we might otherwise imagine. Even if you do become famous, rich or celebrated, it probably won’t shift your overall happiness too much.
This research is also comforting, in that it suggests failures are also less painful. Even if you aren’t successful, it may also have a smaller impact on your happiness than your fears might suggest.
Why Pursue High-Variance Professions?
Now I know that if I had read this article a decade ago, I would have quickly compartmentalized the idea away, if not rejecting it outright. I was committed to my pursuit, so nothing could dissuade me. I’m guessing if you’re also contemplating a risky career choice, you probably feel the same way.
Instead of risking you ignoring the message of the article entirely, therefore, I’d like to present exceptions. These are ways of working around the somewhat grim reality of high-variance pursuits, and also, perhaps, ingredients which help enable their success.
Fix #1: Choose Pursuits With a Good Plan B
If I had the choice of which aspiration I could have, I’d rather want to be a start-up entrepreneur, than an actor or athlete. The reason is that the an entrepreneur, even if unsuccessful, can often translate the experience into a pretty good job or career.
If your high-variance profession also has a decent “Plan B” then the logic presented earlier might flip. I know many people who deflected their mediocre results at an entrepreneurial venture into a career than now gives them a lot of satisfaction and happiness. Their “Plan A” may have been risky, but the average potential of all possibilities was still quite high.
Fix #2: Choose Pursuits With Low Costs
High-variance pursuits can often still be valuable if the costs to pursue them are lower. I was able to set up my business with little investment cost while working part-time, so the costs were incredibly low. That meant even if failure was likely, the worst-case scenario wasn’t too bad. Since an exact expected value calculation is usually impossible, knowing that you can live with the worst-case should make it easier to go forward.
Chris Guillebeau’s recent book, The $100 Startup exemplifies this attitude, encouraging entrepreneurship not just with vague motivational slogans but by fundamentally changing the cost structure.
Fix #3: Enjoy the Process
The biggest tipping point for myself in pursuing a high-variance profession was that it was something I really enjoyed doing. If you’re passionate about the pursuit and the process (not just the result) then most of the arguments I laid out earlier fall apart.
I started this business because I enjoyed writing, marketing and trying to figure out how people think. I started my MIT Challenge because I wanted to learn computer science, whether people acknowledged it or found it interesting was a secondary concern.
It’s in this, that I believe the real lesson comes when pursuing your dreams. If you don’t enjoy the process deeply, then it becomes something very hard to justify. But if you do, then maybe the odds of success don’t matter quite so much.