Stories about massive risk lead to great self-help books and graduation speeches. But they are rarely a reflection of reality.
The success of people like Richard Branson and Steve Jobs leads to a major misconception.
The only way to succeed is make to big bets, dents in the universe and build rocket ships. So people jump out of planes without a parachute, only to fall to their death.
You will have to start, but before you're ready. The conditions will never be perfect and the right time is nothing more than a mythical date in the future. But that's not a license to be reckless.
One way to mitigate risk is to make what author Peter Sims calls “Little Bets”, with the following criteria.
1. Affordable Losses
By definition, when you make a bet, there's a possibility that you'll lose. You could lose time. You could lose money. Thus, you have to make the loss affordable. If losing a bet could mean the death of your company, that's not an affordable loss.
In 2014, we planned a two-day event called The Instigator Experience. Conventional wisdom would be to book a venue, announce the dates, and sell tickets. But if you don't sell any tickets, then you end up losing money on a venue that you never use.
I started by building a simple landing page with an email capture form on it. I spent the next 6 months collecting email addresses and recruiting speakers. I announced the city so people would be able to book their flights. But we didn't spend any money on the event until we sold tickets. It's the same approach that I'm taking on our next event, The Architects of Reality.
2. Fail Fast with Low-Risk Prototypes
To create a low risk prototype, don't spend months building a product. Don't add bells and whistles without knowing if someone wants to buy your product. Most of the companies that are unicorns started with low-risk prototypes.
If you're not embarrassed by the first version of your product, you've shipped too late. - Reid Hoffman
I mocked up the first version of what is today The Unmistakable Creative in an hour. It looks nothing like our site looks today. It didn't even have the same name.
Chris Rock's National Comedy Tour:
If you've ever seen Chris Rock's national comedy tours, you that know he makes you laugh until you cry. You may not know this, but he's tested all of the material he uses in those tours and proves that it works.
Before a national tour, he goes to open mic nights at local comedy clubs, tests material, and some of it bombs. The open mic night allows him to test his material in a low-stakes environment. People haven't spent a hundred dollars on a ticket. So they don't have high expectations.
Book Publishers and Aspiring Authors:
Publishers mitigate risk by giving book deals to people who made little bets. Building a platform is a series of little bets.
After writing a blog post every day for years, Seth Godin has made enough little bets to prove demand for his work, so a publisher can make a big bet.
The Art of Being Unmistakable was a series of long Facebook status updates. I didn't know it but I was testing the emotional resonance of my material. I compiled the updates that resonated with readers into a book, and the book became a Wall-Street Journal Best-Seller.
For aspiring authors, it's easier than ever to make little bets. You can self-publish a book, which is one of the most valuable things you can do for your career. You can give away a free e-book without asking for an email address. This reduces friction and makes it easier for your idea to spread.
Founders and Minimum Viable Products:
Before the internet, determining product demand was expensive and time-consuming. But the commercial internet made a direct connection to potential buyers possible. This makes it much easier to estimate demand for a product.
Eric Ries made this idea mainstream when he wrote The Lean Startup. He coined the term “minimum viable product”. As Ries says in his book,
Every business plan begins with a set of assumptions. It lays out a strategy that takes those assumptions as a given and proceeds to show how to achieve the company's vision. Because the assumptions haven't been proven to be true (they're assumptions, after all), and in fact are often erroneous, the goal of a startup's early efforts should be to test them as quickly as possible.
It doesn't make any sense to spend time and money or raise funding for a product nobody wants or needs.
3. A Growth Mindset
Sometimes you lose bets. But, you don't want a temporary circumstance to become a permanent identity.
In 2009, when I graduated from business school, I started a web site called "100 Reasons You Should Hire Me". It was a lousy attempt at standing out in the job market. I could have concluded that I wasn't cut out to be a writer. But I learned from it and applied what I learned to my next project, and so on.
4. Small Wins
Little things we do repeatedly lead to big changes in our lives. A small win might be positive feedback from someone who uses a product. Negative feedback could be a small win too, if it helps you make better product. Aim for progress not perfection.
Making little bets has been central to everything I've done with my career. Peter Sims' book is one of few that have had the most measurable impact on my career.
If you want to accomplish ambitious goals, make little bets.