The 4 Steps of Risk Evaluation

Vinod Khosla is an Indian-American billionaire and the co-founder of Sun Microsystems (Sun is actually an acronym for the Stanford University Network, as Khosla and two other classmates founded the company). Years before, he served as a general partner at Kleiner Perkins, where he was a part of some huge early tech successes and some spectacular failures — which he claims helped him in his future investments.

Khosla later authored the "Gene Pool Engineering for Entrepreneurs,” where he notably wrote that "The goal of gene pool engineering is first to create a culture where multiple people engage in problem-solving, and team members share best practices from previous organizations and a diverse set of backgrounds for the specific problems being addressed."

Khosla gene pool has a four-step plan for entrepreneurs when hiring talent to help them launch their start-up off the ground and run seamlessly. Although intended for entrepreneurs, Khosla's advice is vital to anyone who accepts a new position or is looking for ways to solve current problems.

1. Identify the five largest risks involved in the decision. Examine everything by asking why something won’t be successful instead of assuming everything will go as planned. From the risk list, you then start to look for employees. Without understanding your risk, you could never build a successful company.

2. Define the skill set necessary to address those risks. Hire people who fit that skill set, not ones who are friends or workmates in the past. Make sure whomever you hire has expertise in the risk areas.

3. Who is the best problem solver, not who worked for the problem solver. This occurs in sports often when owners/athletic directors hire coaches from successful programs and then wonder why their new coach does not have the same talent to make decisions. Don't hire people who are associated with greatness; hire those who have great potential.

4. Diversity in Thought. Hire two or three people who have diverse backgrounds and are qualified to address each of the risks. In the end, you should have a diverse team.

The key lesson from Khosla that we can all benefit from lies with understanding and correctly identifying the risk. If we miss on risk evaluation, then the entire operation can fall apart. As we sit in our office, classroom or boardroom today, let’s write down the five biggest risks to our future and then set out to follow the Khosla plan.

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