Rule 7: Become a gambler
Startups and poker have more than a little in common. To succeed in both, you need to get comfortable taking risks every day.
The highs and lows of startup life are a given, but how you handle those fluctuations determines whether you will succeed. By developing a stoic game face, you can learn to survive the lows and maximize the highs. You can calculate risk at every step and hone your ability to filter out the throwaway ideas, so you can act on the unicorns that occasionally come your way.
People respond to risk in different ways, and while some are motivated by the thrill of the unknown, others are paralyzed by the fear of failure.
For the conservative types who calculate every downside, startups can be a recipe for disaster. Failure in some form is inevitable, in small ways like late product deliveries, or in big ways like bankruptcy. The danger for the risk-averse is disqualifying themselves from the game if they experience failure in any form.
For other people, startups are a great place to pursue upside and exercise their aggressive thinking. These individuals have the ability to view failure as the necessary cost of doing business and an expected detour on the road to success. The danger for these people is their tendency to count their proverbial chickens before they hatch; they can wrongly think they won the game before the hand is ever called.
Part of entrepreneurship is understanding your own risk tolerance and behavior.
The best path is neither end of the spectrum, but instead a healthy balance between conservative and overly aggressive. With this perspective you don’t run away from every risky idea that arises, but you don’t swing for the fences every time either.
When launching a startup, you must think about both the downside and the upside. Startups are a form of gambling where you are betting your money, other people’s money (OPM), your time, other people’s time, and your reputation.
Like poker, playing the game is part science and part art; sometimes you are betting on a hunch and trusting your instincts, while other times you are acting on experience and observation. The best startup ideas blend instinct and experience.
For me, the concept for Loopd came from observing how antisocial and disingenuous my college friends and I became in a social setting. At parties or bars, we descended to smartphone dependence instead of face-to-face conversations. We preferred to text, Facebook message, or Snapchat later instead of engaging now.
The choice seemed so binary, and I knew there had to be a better way.
I had a hunch that a fun, unobtrusive digital wearable could make these interactions easier and more beneficial. Instead of technology being a hindrance to true friendship, I believed a wearable device like a badge or bracelet could actually enhance connection. Sure, this was a gamble that would take time and exposure to gain adoption, but the hunch has proven true.
Beyond betting on a concept, when you launch a startup you are also playing the game of raising funds, and the hand could be dealt in endless ways.
If you raise money from angels, venture capitalists, investment banks, or through crowdfunding, you are exchanging equity and control for the hope of a positive outcome (exit, employee buyout, or IPO). If your startup grows slower than expected, you might have to raise more money in exchange for more control. Or, if your startup fails to grow at all, you might face an investor takeover, fire sale, or even bankruptcy.
Business is risk at every turn. You risk your reputation, your relationships, and the well-being of yourself and those who rely on you. While winning is always the goal, sometimes losing well is the only course of action. By surrounding yourself with wise advisors, strong allies, and honest feedback, you can place the best bets and manage the risk to navigate the waters of startups with the fewest casualties.
Although cliché, the truth in some country music is hard to deny. Every time I hear the Kenny Rogers hit “The Gambler,” I can’t help but think about how it resonates in how it so accurately describes the risks and realities of startup life:
“The Gambler”
On a warm summer’s evening
On a train bound for nowhere
I met up with a gambler
We were both too tired to sleep
So we took turns a-starin’
Out the window at the darkness
The boredom overtook us
And he began to speak
He said, “Son, I’ve made a life
Out of readin’ people’s faces
And knowin’ what the cards were
By the way they held their eyes.
So if you don’t mind my sayin’
I can see you’re out of aces
For a taste of your whiskey
I’ll give you some advice.”
So I handed him my bottle
And he drank down my last swallow
Then he bummed a cigarette
And asked me for a light
And the night got deathly quiet
And his face lost all expression
Said, “If you’re gonna play the game, boy,
You gotta learn to play it right.
You got to know when to hold ‘em,
Know when to fold ‘em,
Know when to walk away,
And know when to run.
You never count your money
When you’re sittin’ at the table.
There’ll be time enough for countin’
When the dealing’s done.
Every gambler knows
That the secret to survivin’
Is knowin’ what to throw away
And knowin’ what to keep.
’Cause every hand’s a winner,
And every hand’s a loser,
And the best that you can hope for
Is to die in your sleep.”
And when he finished speakin’
He turned back toward the window
Crushed out his cigarette
And faded off to sleep
And somewhere in the darkness
The gambler he broke even
And in his final words
I found an ace that I could keep
You got to know when to hold ‘em
Know when to fold ‘em
Know when to walk away
And know when to run
You never count your money
When you’re sittin’ at the table
There’ll be time enough for countin’
When the dealing’s done
You’ve got to know when to hold ‘em
(When to hold ‘em)
Know when to fold ‘em
(When to fold ‘em)
Know when to walk away
And know when to run
You never count your money
When you’re sittin’ at the table
There’ll be time enough for countin’
When the dealing’s done
You got to know when to hold ‘em
Know when to fold ‘em
Know when to walk away
And know when to run
You never count your money
When you’re sittin’ at the table
There’ll be time enough for countin’
When the dealing’s done
Reprinted with permission from Kenny Rogers. The Gambler. Greatest Hits, Larry Butler, 1978.
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