Entrepreneurs are not unusually risk tolerant; rather, they are overconfident.

That tendency to ask for too much could be seen as a type of over confidence, but it's also a riskier strategy on average.

Then, these people are almost indifferent to the details of whatever deal they've made. They will make a deal that is exactly what it needs to be to get signed, but which is utterly impossible to deliver. They don't care: "it'll work out."

That's another form of over confidence: the belief that impossible things will work out well enough. It also turns out to be true enough to get someone into the multimillionaire range. One has to be a little more careful to break much higher than that, but it's a good starting strategy. And again, it's a risk to make a deal you might not be able to deliver on.

I didn't read the paper, but I know that dissertations necessarily have to be very limited, so they tend to be simplistic when they are original research, so I wonder:

1) Who was in the entrepreneur group? Successful serial entrepreneurs, or just some undergrad kids in the entrepreneur club?

2) How risk measured? A little psychological battery designed to measure general risk-taking won't capture the mindset of a person who does shaky deals. Is it risky to do try for a deal that'll probably fall through and you probably can't deliver on, or is it safer to do lots of quick and dirty deals so the volume makes up for the instability? How could this paper have measured that?

If anyone has access to this database, let us know the answers: http://mansci.journal.informs.org/cgi/content/abstract/52/9/...

And it isn't unusual risk tolerance. You know what's really risky? Depending on a salary to pay your mortgage. Having kids. From my perspective, multi-decade obligations are risky. Compromise is risky. Making my own way is the only risk-free thing I can do in a society which exists to remove its own free will.

Perhaps some people are confusing "overconfidence" with a lack of belief in absolutes like "failure", "success", and "mistakes".

After all, used to be taking even financial risks could get you killed very easily. Nowadays, what's the worst that can happen? You end up broke and living at your parents until you're 25.

Take the risk. It's worth it. Not enough people are taking them.

He's generalizing from banking industry data from 1984-1997, which seems like a tenuous proposition. Recent events suggest the risk in the banking industry was not properly understood during that period.

Further, when examining risk tolerance, it might be good idea to look at an industry where expected returns can't be accurately forecast in advance. Banking seems like an exception to the rule here.

There are a couple of subtle misdirections in the paper. In one place he says: "This risk of failure is considerable. Approximately 10% of all firms in the United States fail each year (U.S. Small Business Administration 1999)." Actually, the risk of failure of banking institutions is in Table 3, which he doesn't textually mention is 1%.

He also mentions "Furthermore, even though the banking is one of the oldest industries, it has been growing at 6.5% rate over the past ten years (roughly three times GDP growth)." which is irrelevant as it's over a different time period than his data and analysis. Further, the chart he inserts directly after this sentence shows a decreasing rate of entry over his studied period. Also, notice the numbers: this whole paper is premised on the entry of between 50 and 400 new companies per year.