“Someone who followed the logic of serial entrepreneurs would attack the problem differently. They’d begin by taking a small step and say something like “I want to lose one pound this week.” With that modest initial goal in mind, you are far more likely to eat a little bit less over the next seven days and exercise a touch more. If at the end of the week, you have found that you have indeed lost a pound (or perhaps more), you will say to yourself, “That wasn’t so bad. Let’s see if I can do it again next week.” And if you fail, you’d try adding something else.“
The uncertainty we all face every day—everything from wondering if we will we have a job tomorrow to whether the weather (hurricanes; massive storms) will up-end our lives—is like being on a confusing road trip. You know where you want to go, but the incomprehensible road signs, congestion, construction delays and the likes.. make it extremely difficult to get from here to there.
As we try to move from where we are to where we would like to be in our lives, it sure would be nice to have a reliable GPS.
We have created one. Although we will admit we did it accidentally. Let us explain how it came about so you can see:
a) it works, and
b) it can help you.
It started with us trying to answer a fundamental question: What do you do when you don’t know what to do?
Although it sounds vaguely mystical, the question deals with an extremely concrete problem. As you head into the unknown—such as trying to find a secure place you’d enjoy working in the current economy—the way we were taught to think doesn’t do us much good.
You know the logic we were told always to follow:
Analyze the prospective market and choose segments with the highest potential return.
Develop and optimize a plan for success.
Calculate the costs of achieving it.
Proceed down the most efficient path possible.
While it makes enormous sense in a predictable setting—say a booming economy—it doesn’t in the face of the unknown because you simply don’t know what could happen. If you use this logic there all you end up doing is making projections…on assumptions… that are contingent on guesses.
That’s just silly.
So, what do you do?
That was the question we began wrestling with and almost immediately we asked who are the best people at dealing with uncertainty? The answer? Serial entrepreneurs, people who have started two or more organizations successfully. There is nothing more uncertain than starting a company, and these people have mastered it more than once.
So we looked at how they handle things. And when it came to moving into the unknown, they used a different logic. Instead of focusing on expected returns—or how much they could possibly make—their attention is on “Acceptable Loss”—how much they might lose, should things not turn out in the way they hope. Employing the concept of “acceptable loss” keeps any failures small. By definition, you never lose more than you are willing to.
Let’s see how acceptable loss plays out in practice.
Consider the case of a man in his mid-40s who is thinking about quitting his high-paying job to start his own company.
If our potential entrepreneur were to follow the typical reasoning governing risk, he would do in-depth research to estimate not only the size of the market, but also all the risks he might face (competitors, changing market conditions, etc.). The more potential risks/challenges he believed he was up against, the more money he would raise, to help offset the uncertainty.
Given all this, he might say, “I’d better do a business plan. (Months, maybe years, pass while he does research and prepares the document.) At the end of all that time he says, “it looks like I need $1 million to start my idea of creating a service that matches recent MBAs who have a scientific background with high tech employers. My projections show I’ll break even in two years. I can put in $100,000 funded by family and friends and my savings. So, I need to raise another $900,000 before I can start. That’s assuming I can live without a salary for two years. Let me start raising money.”
In contrast, for someone using affordable loss reasoning, the idea of getting underway is far more important than having a fixed goal, because they understand they have no idea of knowing ahead of time whether their idea will truly work as imagined. So, their interior monologue sounds like this:
“I am 46 and I just don’t know how long I am going to have a job. I’ve always wanted to be my own boss. By drawing on my own resources, and borrowing from family and friends, I have $100,000 I can commit to finally going off on my own. I need $50,000 for expenses and $50,000 to live on for the next 6 months until I get some revenue. In the worst happens and I fail, I will go back to my old job—if it is still there—or I get a different job and figure out a way to pay back everyone. It wouldn’t be the end of the world.
“I am going to do it and adjust on the fly if I have to. My basic premise must be right. There is an unaddressed opportunity to serve the MBA market. I think the job matching idea has a lot of promise, but if it turns out a website is better, or a newsletter or whatever, that’s what I’ll do, once I am underway.”
Seeing the differences between the two approaches, we realized we were on to something. We checked with countless serial entrepreneurs and found that while each was unique, they all followed the same approach to venturing into the unknown.
To reduce it to a single formula, they:
* Determine their desire, i.e. they begin by figuring out what really gets them excited. (“I want to start my own company helping newly minted MBAs.”)
* Take a small step toward finding or creating something that will allow them to capitalize on that desire. (“Let me start with the job matching idea.”)
* Learn from taking that small step. (The response is okay. But they keep asking for is support material like newsletters and advice on how to fit into a new company.”)
* Build off that learning and take another step. (“Let me add a premium package to the job matching service; and also offer the supporting materials a la carte.”)
* Learn from that one…(“People keep asking for services and the margins are better)
and so on. It’s a model that we call: Act. Learn. Build. Repeat.
And as we thought it through—and tried it out on friends, colleagues and readers of our blog—we realized it would work everywhere!
A quick example will prove the point. Say you want to lose thirty pounds. How would you do it?
Well, following the logic we grew up with, you would work out a plan. Maybe you would stop eating carbohydrates, or follow the current hot diet. You’d keep your eye on the prize—losing those thirty pounds. And history shows that you would probably fail. The level of commitment required (high) and time frame (long) are just too much for most of us.
Someone who followed the logic of serial entrepreneurs would attack the problem differently. They’d begin by taking a small step and say something like “I want to lose one pound this week.” With that modest initial goal in mind, you are far more likely to eat a little bit less over the next seven days and exercise a touch more. If at the end of the week, you have found that you have indeed lost a pound (or perhaps more), you will say to yourself, “That wasn’t so bad. Let’s see if I can do it again next week.” And if you fail, you’d try adding something else. (“Hmmm. If I keep exercising and eating less and have just one glass of wine with dinner instead of two, maybe that will work.”)
If that worked, you’d build off your success and try it again the following week—and keep repeating it until you have achieved your goal.
We are absolutely convinced that the Act Learn Build Repeat model where work everywhere and serve as a GPS for your life.
What do you think?
“Opinion pieces of this sort published on RISE Networks are those of the original authors and do not in anyway represent the thoughts, beliefs and ideas of RISE Networks.”