Elon Musk’s Risk Tolerance: Why He’s So Successful

This article is an excerpt from the Shortform book guide to "Elon Musk" by Ashlee Vance. Shortform has the world's best summaries and analyses of books you should be reading.

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How does Elon Musk manage risk? Does Elon Musk create safety nets?

Elon Musk risks his personal life, money, time, and health to see his dreams become realities. His willingness to make large personal investments is what sets him apart from other entrepreneurs and makes him so successful.

Keep reading to explore why Elon Musk risks everything to make his visions realities.

Elon Musk and Risk

Musk’s ability to handle stress complements his high risk tolerance. This means he doesn’t create any safety nets for himself should he fail. This mindset has given him an edge in his professional life. He’s willing to risk everything—his money, his possessions, his health, and so on—to make his vision a reality. Most people would find what Elon Musk risks to be extremely stressful, but Musk sees it as necessary in order to achieve his goals. He’s willing to invest all of his time and money into his businesses for the possibility of even bigger gains. 

When he was just starting out with his second venture, he put $12 million into X.com, making him the biggest shareholder of his new company. The author of Elon Musk explains that Musk’s personal investment was different from most entrepreneurs at the time, who would typically make a lot of money, and then use their new wealthy status to convince other people to invest in their next venture instead of making a large personal investment themselves.

When starting his companies, he invested almost all of his money into his ventures. When both SpaceX and Tesla had financial problems in 2008, Musk sold his car and other possessions for extra money so he could keep the companies afloat. Elon Musk risks more than most people would in his position. While Musk faced the possibility of losing everything, his hard work paid off, and he has seen a great reward from the risks he took. 

Develop Your Risk Tolerance

While Elon Musk risks often and encourages others to take risks—especially when they’re young—not everyone has his natural high level of risk tolerance. In Who Will Cry When You Die, Robin Sharma notes that taking risks is beneficial in life as well as business, since you’ll experience more of life and live with fewer regrets.

You may struggle to take more risks and be more adventurous if you’re naturally risk-averse. While you can’t eradicate your risk aversion, you can hone your risk-taking skills so that, moving forward, you build up your risk tolerance: 

1. Practice with low-risk and low-pressure decisions. Take the risk of purchasing a new toothpaste brand, for instance.
2. Create a pros and cons list and weigh them against each other.
3. Don’t fixate on the worst-case scenario. This may stymie you, and the worst-case scenario is unlikely to occur.
4. Think like someone else. Limit your natural risk aversion by adopting a persona when making decisions. Approach decisions as a world-famous rock star, for instance.
Elon Musk’s Risk Tolerance: Why He’s So Successful

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Like what you just read? Read the rest of the world's best book summary and analysis of Ashlee Vance's "Elon Musk" at Shortform .

Here's what you'll find in our full Elon Musk summary :

  • A look into Elon Musk’s childhood and early companies
  • Musk's roles in SpaceX and Tesla, and later, in SolarCity
  • The traits and management methods that helped Musk succeed

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