Leading in Turbulent Times: How to Develop a Risk-Tolerant Mindset

Behavioral economist and Professor of Marketing Baba Shiv works with entrepreneurs on how to build a risk-tolerant mindset. A mindset, Shiv believes, that is crucial in times of crisis.

While we take a break and prepare for season two of If/Then, we're sharing an episode of Grit & Growth, a podcast from our partners at Stanford Seed. Here, Baba explains two types of mindsets: a fear of failure or a risk-averse mindset (type one) and a fear of missing out on opportunities mindset (type two).

“What the rational brain is good at is simply being rational ... it lists what the emotional brain has already decided to do. If you’re stuck in a risk-averse mindset, the rational brain will come in and say, 'These are the reasons why you should not innovate’ Whereas if you’re in a type two mindset, the rational brain will come in and say, 'Here are the reasons why you should take some chances.'”

And Shiv believes that taking chances, especially when your competitors are being more timid, is how leaders and companies can succeed. Shiv has seen firsthand that entrepreneurs from emerging economies are particularly innovative: “They’re facing constraints all the time and as a result are more resourceful, not in spite of their situations, but because of them.”

Shiv is the Sanwa Bank, Limited, Professor of Marketing at Stanford Graduate School of Business

Top Takeaways

1. Sleep. Without it, you’re more likely to wake up feeling risk-averse ... the antithesis to innovation.
2. Calm your mind and the rest will follow — develop a meditation, yoga, or tai chi practice to make your breath and brain more resilient to stress.
3. Pay attention to your heart—actually your heart rate variability — so you know if it’s a good time to make an important decision.
4. Innovation = creativity, multiplied by execution, divided by constraints. Don’t forget to think about your constraints in the design process.
5. Focus on building your collaborative advantage (not just competitive advantage) by developing meaningful connections with suppliers, customers, partners, even competitors. You’ll make more progress with relationships based on trust than just transactions.
6. Instill an innovative mindset throughout your company — survival is going to come from teamwork.

• On Grit & Growth, meet intrepid entrepreneurs from Africa and South Asia, hear their stories of trial and triumph, and gain insights and guidance from Stanford University faculty and global business experts on how to transform today’s challenges into tomorrow’s opportunities.
• Baba Shiv on If/Then Season One, "More Than a Feeling: The Keys to Making the Right Choice"

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