Bet on process over outcome
If you walk into a casino and on a whim bet your entire life savings and you win. Was it a good decision? No. Even though many would congratulate you on a job well done, it was a bad decision. Or the opposite example of simple expected value. You make a decision that has a 90% chance you’ll lose $5, but a 10% chance you’ll receive $1000. Each time you make the same decision, the expected value of that decision is $95.50, even the times you lose!
Any individual decisions can be badly thought through, and yet be successful, or exceedingly well thought through, but be unsuccessful, because the recognized possibility of failure in fact occurs. But over time, more thoughtful decision-making will lead to better overall results, and more thoughtful decision-making can be encouraged by evaluating decisions on how well they were made rather than on outcome.
The above quote is from this section of a book, Be The House, that a friend sent me. I’ve been thinking this way for awhile, although I would not have said it quite so eloquently.
The swing for the fences success in Silicon Valley get a disproportionate amount of attention, but over the years I’ve been surprised at the number of very successful entrepreneurs I’ve met who quietly make a million or more in profit a year or have had a string of small to medium business that they’ve sold. This doesn’t mean, don’t think big, just be diligent, focus on facts, and tip the odds in your favor—be the house.