How To Be Lucky As An Entrepreneur

Hubspot

Luck and risk are 2 of the most important words for anybody who wants to be great but they kind of I think for most people feel like it's something that's outside of your control right luck is this magical thing that either happens to you or it doesn't or risk is this thing that you either get screwed by or you don't and I don't think that's true I think there's a lot more to risk and luck than most people recognize it's the same way that I think eskimos have like 40 or 50 words for snow right when we see something just falling from the sky that's white and fluffy we just think that's snow whereas they have 40 or 50 different words to describe the different types of snow as you would if you lived in an extremely snowy environment you would develop that vocabulary and so similarly for an entrepreneur who is going in an environment of trying to make great success happen maybe we need some nuance some differentiation between the different types of luck the different flavors of risk and so that's what I'm gonna tell you today these are the 4 flavors of luck and the 4 flavors of risk let's start with luck so this I got from marc andreessen back in the day he had a blog that he used to keep up it's down now there's an archive of it up online somewhere called pm archive and I still remember reading this post like you know 10 years ago and it was about the 4 different types of luck I think he originally read it in some book and the the levels of luck are as follows level 1 is called blind luck you just sit around you get struck by lightning and you know you didn't do anything you just happen to be you and it's not something you can count on either right so this is blind luck and you know for me I was just born with the use of my my limbs and and I was born healthy I was born in the right country and you you know I remember one time my cousin gave me a bunch of raffle tickets that he had bought he gave it he gave it to all of our cousins and I ended up winning this dali painting out of out of the raffle I didn't I literally didn't do anything I just sat there he handed me a ticket my ticket happened to win and so that's an example of blind luck that's level 1 okay can't do much with that because it's sort of either gonna happen or it's not the next one you can increase the odds of of luck in your favor by going to level 2 level 2 is what the the phrase around fortune favors the bold and it's the same as the the one above it's sort of a lucky chance but you increase the odds of it happening by adding motion or action to the mix so you're doing a bunch of stuff you're running around you know if the first one is you're standing in place and lightning strikes you this one you're running around all over the place kicking up dust stirring up the pot and something happens as a result of your motion your motion increased the surface area you were covering where you might happen to get lucky and so this is a chance encounter right maybe you're just out and about and in doing so you bump into somebody who's really interesting and opens up some opportunity for you and there's a phrase there's a quote that I like which is you know I've never heard of someone stumbling onto something good while sitting down and this just emphasizes the importance of simply taking a bunch of action of of being out there of of having some motion and and carrying with you some good vibes so that good things happen during the during the wait so that's level 2 motion you know fortune favors the bold level 3 this is where it starts to get interesting this is chance favors the prepared mind right so this is where you notice that something lucky has happened where other people may not have noticed and it is your years of preparation of looking at things to even understand this so any investor knows this right you look at a 100 deals it's not because all a 100 are gonna be good it's so that when that 101st deal comes that really has killer metrics you're able to recognize that that deal is unique that that price is a fantastic price or these metrics are off the charts because you have a benchmark of what normal looks like this also happens in science I mean there's an amazing story about the the discovery of penicillin right this drug that has saved millions and millions of lives in the course of history well the way it was discovered was the scientist who was who was studying he just noticed that some mold had fallen on his petri dish and it was an accident right so that was not in his con he was not the result of his action but he was he had a prepared mind he noticed that around the mold in the petri dish no bacteria was growing he started to wonder maybe there's something about this mold that kills bacteria and he wrote that down he tried to convince others of it and nobody cared none none of his peers cared and then you know 10 years go by before somebody else picks up this paper and says that's weird that this sort of the staph bacteria was not growing around this mold the mold seemed to kill staph bacteria what I wonder if we could go back and revisit that and then they tried to tried to actually revisit it so they had the prepared mind to read that paper and notice there's something interesting there and so that is luck favoring the prepared mind the last one the level 4 luck is luck finds you so this is reputational luck you've heard me on this podcast say before that my goal with this podcast is not to become well known alright I'm not trying to be famous I'm trying to be known well meaning I just try to put my brain and my the things I'm most into out there on blast so that people who are like minded will come find me people who are building you know startups in that space will come find me and I can invest in them people who are you know using a product that they know that I love they'll share it with me right that's the value that I get back out of this because I'm well known my reputation brings me some luck and so the example I think naval gives of this he says imagine you are known as the best deep sea scuba diver in the world right you are amazing at deep sea dives and you're sitting on your couch one day you're not doing anything and the phone rings and somebody calls you and says we've discovered a treasure off the coast of india buried deep down below will you come help us retrieve it and you get to share you know whatever 25% of whatever we find so now you your reputation has caused you to find a treasure right luck has found you your reputation of being a great person at doing x will cause people to come find you and so you know we just did a podcast with kevin rose and he talked about this with twitter he had the prepared mind to notice that twitter was gonna be a big deal and he's very humbled like other investments he says you know I don't know you just I just wrote the check I I like the person it turned out well but for twitter I said did you know it was the it's gonna be a big winner and he goes I thought it was the next big thing he goes because I had seen blank blank blank I was using it and I noticed man this thing has really given me this feeling imagine I'm just a little tech celebrity imagine if real celebrities got a hold of this this is gonna be crazy and like he noticed that facebook and all the social networks before this were all based on this idea of a friend where I had to request to follow you and you had to accept it in order for me to see your content and that twitter this new thing that everybody else was making fun of had had one new feature which was it was one directional I could just follow you and you didn't have to give me approval and he goes wow that's gonna be amazing for celebrities so that was luck you know the prepared mind he then took action he reaches out to evan he says I'd love to invest oh sorry the round is closed sorry about that so he's turned away but this is where his reputation allowed him to get lucky a couple weeks later evan calls back and says hey you asked about investing right you know we have this engineer who's leaving he wants to sell some of his shares we can you know you could buy his if you want right I'll let you in because it's you because I love I I like you I like the way you are I I think you got you have a good eye for product you're really active on twitter and I know you really believe in this you've made that well known well here you go here's your opportunity and that $25,000 turns into you know a $100,000,000 + payday that's luck finding you our software is the worst have you heard of hubspot see most crms are a cobbled together mess but hubspot is easy to adopt and actually looks gorgeous I think I love our new crm our software is the best hubspot grow better so those are the four levels of luck now let's talk about the 4 levels of risk the 4 these are not levels these are more flavors of risk so the first one the first risk or I'll put it differently people think the big risk is you go and do something crazy right I'm gonna go jump out of a plane skydiving I'm gonna go invest all my money into crypto right those are obvious risks but because they're obvious risks people don't always take them or they take a lot of precaution with it so most people don't go skydiving they say that that sounds risky so I'm not gonna do it and even the people who do they go with an instructor who's done thousands of things before and they make sure that the place has good reviews and that is good track record and they say okay great I'll jump out of this with a parachute with an with a professional so they they do things to mitigate risk so think you know same thing with crypto oh you're investing in crypto but you're only investing 1% 5% 10% some smallish% of your net worth into this risky thing because it was obviously risky so the things that are obviously risky don't actually trip you up it's the things that are not obviously risky so an example of that would be everybody before you know 2 start of 2008 generally thought that mortgages and the housing market was a pretty safe industry to bet in to invest in and that's why if you ever watch the big short you know all these mortgages were highly rated debt and in actuality they were much riskier than people realized and that's what caused the global financial crisis was because there was this huge there was this risk that people did not identify as risky they thought it was safe but actually was risky and they therefore relied too much on it took out too much leverage blah blah blah and then you get disasters and so that's the first thing to recognize about risk is risk is not just the things you think about so here's some of the hidden types of risk or different flavors that you should think about the first one is mediocrity because when most people go into a job or a business that they wanna start they think that their risk is failure that I'll try this and it's gonna totally crash and burn and in actuality at least for most people in america that's not that painful of a risk you waste a little bit of time but it failed it you know crashed and burned and you can move on and you learned a lesson and you have a story to tell and you might have met some people along the way you've built some skills and so you actually don't take that much risk doing it and you generally will you know not put too much money into something at that stage so that's one version of of failing with a let's say a start up or a job but the other version that I think is much more sneaky and much more peep much plagues many more people is mediocrity which is the risk of having something that's just okay it's not bad enough to obviously fail nor is it good enough to be amazing and so the risk is that you're wasting your most valuable asset your time on something that is not great and so for you listening to this podcast you're the type of person that wants greatness out of your life then the biggest risk to you is mediocrity because failing is fine you'll just try another thing you'll try something else but something that's just alright it's not great but not bad enough to fail is gonna deprive you of your most valuable asset your time so mediocrity is the first flavor of risk to identify in what way are you just settling for a bad relationship or a just okay relationship a just okay job a just okay level of traction at your start up that is one risk the next one safety safety is a risk okay how is safety a risk well there's a risk in not taking enough risk so you gotta ask yourself I have a dream I have an ambition I have a goal that I'm trying to get myself to if I keep doing things the way that I am currently doing them right in my comfort zone where I am safe I'm not taking any risk right now is it going to lead to my dream right am I on path am I on track am I is my trajectory taking me to where I'm trying to go because if not then the safety you have now is actually putting your dream at risk your goal at risk so people usually think am I putting myself currently at risk but what you wanna think about is am I putting my dream at risk am I putting my future success at risk by playing it safe now okay so that's the second one playing it too safe the third risk is the eyes wide shut risk that's the one I talked about with the mortgages right it's one thing when you go in eyes wide open you say oh I'm doing this thing but it's risky so therefore I'm not gonna bet it all and I'm gonna take some precautions that's eyes wide open but what about eyes wide shut what happens if you you think something is safe but it's not you trust the wrong person and you bet it all or you think that housing is safe and so you're super levered up you think that this is too big to fail but in fact it is not and so eyes wide shut risk you wanna ask yourself what am I assuming is safe that may not actually be safe the last one is market risk versus executional risk versus technical risk these are like the eskimos having 50 words for snow there are many different types of risk in business so market risk is trying to figure out will does anybody even want this at my start my previous startup you know the the studio I worked at monkey inferno we were building we had every resource available we had all the money we wanted we had team of engineers that were super smart freedom to work on whatever we wanted but the boundary was we gotta work on something in consumer and it shifted towards social and when we try to build the next social app you're taking on massive amounts of market risk does anybody want your thing is this gonna be the next twitter the next snapchat etcetera that was massive market risk you know it didn't matter that we had a killer teamwork where we could build a killer product because market risk means if people don't actually want your well made app it multiplies it by 0 and so the next thing is then you take friends like enduring ventures or cody sanchez and people who buy cash flowing businesses that's fantastic they're not taking market risk the market has already proven that they want that business they want that product it's already cash flowing so they take executional risk they pay a price maybe 3 4 5 times earnings and they're taking executional risk that can I improve the business can I improve through executional efficiencies or or growing track you know growing revenue or reducing costs can I improve this business so they take executional risk you know when I buy this owner out is the whole thing gonna fall over or can we continue to execute so they take they don't take market risk they take execution risk and then you have people who are people who I invest in for my startups that often take technical risks so the example I give of this is a pizza making robot let's say that I'm domino's pizza and a startup comes to me and says hey we have a robot that will replace that worker you have in the back that's sitting there he's checking his phone picking his nose and he's calling in sick every 4th day and you know he's the one who's supposed to take the dough put it in the oven put the cheese and sauce on it and put it in the box so here's the deal I have a robot that will put a perfectly circular dough with the perfect thickness that you specify or add the exact amount of cheese and never waste waste too much too much extra cheese it'll bake it to the exact amount of time every single time it'll never call in sick it can work 247 and and it'll never complain and ask for a raise okay that's this robot so there's if you could deliver such a product there would be essentially zero market risk because of course domino's would wanna replace more expensive labor that is harder to manage with something that is cheaper and easier to manage of course they would do that so the only question is can you make a robot that actually delivers on that promise reliably right can you actually deliver the promise that's technical risk this is with a lot of bio biotech pharmaceutical and like you know you know defense contracts there's things like that where they're taking technical risk can they can they actually make a product that lives up to the spec and so you gotta know what type of risk are you taking so those are the 4 types mediocrity the biggest risk of all safety not taking enough risk eyes wide shut risk that's assuming something is safe when in actuality it's riskier than you think and the last one is knowing whether you're you're attempting to take market risk execution risk or technical risk and being being honest with yourself about what type of risk you're taking when you go into this endeavor the goal is not to avoid risk it's to understand it and then work your way around it alright I think that's it instead of 1 question friday I did framework friday let me know what you think I'm sean vp on twitter that's shaanvp on twitter and so you can find me there let me know what you think about it framework friday is in the books alright have a good weekend