There’s one variable self-improvement gurus fail to highlight when it comes to being successful. No matter how hard you work, how smart you are, or who you know, there’s one factor to your success that’s out of your control.
Luck.
Actually, luck puts too much context on what can simply be called chance. Chance is a constant in all of our lives. Think about how chance influences many huge aspects of your life — who your parents are, who you decide to marry, the career you choose, etc.
You have some control and agency over your life and the decisions you make, but chance is the missing puzzle piece in the totality of your in life. So, how do you deal with chance?
If success is partially due to luck, how do you know which moves to make and whether or not those moves even contributed to your success at all?
How do you deal with failure?
How do you know when to hold em or when to fold ’em?
There’s a strategy you can use that can lead to huge payoffs without risking too much in the process. I’m going to teach you that strategy. But before we talk about that, let’s talk about why you have such a hard time dealing with chance in the first place.
Why You Struggle With Uncertainty
“We favor the visible, the embedded, the personal, the narrated, and the tangible; we scorn the abstract.” Nassim Taleb
The mismatch between academia and reality causes you to view success and failure in the wrong way. In school, you’re taught to look at success in a deterministic way. Study for the test. The test has ‘x’ amount of questions. Get a certain percentage of questions right and you’re guaranteed a certain grade.
In the real world, the set of ‘questions’ is infinite. You can think of each decision you make as an answer to a question in the ‘test’ of life. The difference between school and the real world, however, is that the value of getting a single question right or the downside for getting it wrong varies widely.
If you took a test and got one answer out of 20 correct, you’d have an abysmal result. In real life, getting one decision right out of 20 can make you wildly successful. because certain decisions you make can have a much higher payoff if you get them right.
In school, you’re taught to think in a linear way. You have a predictable route to success based on an incremental pattern you can easily observe.
If you want to be successful in the real world, begin to think in terms of risk and payoff. Adopt the approach of a savvy gambler. This will be difficult because of the way you’ve been conditioned to think about outcomes, too.
Annie Duke, an ex-professional poker player who wrote the best selling book Thinking in Bets, talks about the idea of ‘resulting’ a process where people judge you on the results of your decisions rather than the quality of the decisions themselves:
“Outcomes don’t tell us what’s our fault and what isn’t, what we should take credit for and what we shouldn’t. Unlike in chess, we can’t simply work backward from the quality of the outcome to determine the quality of our beliefs or decisions. This makes learning from outcomes a pretty haphazard process.”
Nobody pats you on the back for coming up with a good idea and executing the right strategy, only to fail. Some ‘successful’ people take a subpar approach and end up wildly successful due to chance.
Survivorship bias causes us to give credit to the people at the top of their field without acknowledging that equally smart and capable people tried the same strategies and failed.
Combine all these factors and you can see why people have such a hard time dealing with risk. You’re conditioned to fear uncertainty and you’re trained to look for predictable routes of success. On top of that, society misunderstands how success and failure actually work.
Fortunately, there’s a process you can use to increase your odds of success, aim for high payoffs, and avoid catastrophic failure.
Little Bets: The Simple and Safe Strategy to Massive Success
“Two fundamental advantages of the little bets approach are highlighted in the research of Professor Saras Sarasvathy: that it enables us to focus on what we can afford to lose rather than make assumptions about how much we can expect to gain, and that it facilitates the development of means as we progress with an idea. Sarasvathy points to the value of what she calls the affordable loss principle. Seasoned entrepreneurs, she emphasizes, will tend to determine in advance what they are willing to lose, rather than calculating expected gains.” – Peter Sims
You live in an amazing time to be alive because you can execute this strategy over and over again for little to no cost until it works. The strategy is simple — make little bets that don’t set you up for ruin.
You look for places to make bets that have a high upside and a low downside. Instead of placing big bets on your future, bets that could wipe you out, you make smart strategic moves and iterate over time.
If you wanted to start a business a few decades ago, you’d have to deal with higher risks. You probably had to get a loan from the bank for startup capital. You’d need to have a physical storefront or warehouse, carry inventory before selling it, and hire staff.
In this scenario, you don’t get unlimited chances to start a successful business. Henry Ford famously got his company to take off after two prior failures — he probably wouldn’t have gotten a fourth chance.
These days, you’re in the perfect environment to create businesses and projects that have low capital requirements, so low that you can keep trying them over and over again.
Some examples of little bets you can make are:
- Creating content – I write something new almost every day. I put the same amount of effort into each post, but some just take off. Usually, the ones that take off make up for the ones that flop. And even if they all flopped, I’d lose out on nothing but time. Most content creation platforms like YouTube, WordPress, Medium, etc. are either free or affordable for anyone with an internet connection and a computer.
- Minimum viable product – With access to affordable freelancers and manufacturers around the world, you can come up with a concept for a product for cheap, or even no money, test it out to see if it works first, then add more inventory if there’s demand. With the ‘no money’ example, you can run ads for a product idea and see if people click on it.
- Low (or no) inventory businesses – With affiliate marketing, you don’t have to carry any inventory to sell products. You can think of each promotion you do to promote these products as a little bet. There are several businesses where you can make money simply by being the middle man, e.g., wholesaling real estate or craigslist flipping.
You can think of this concept of little bets in a ton of different contexts. You can attempt to find success in any area of life in a way that protects your downside and maximizes your upside.
To be successful and find a strategy that pays off, you need to change the way you think about risk.
Change Your Relationship With Risk
“If you do things that are safe but feel risky, you gain a significant advantage in the marketplace.” Taylor Pearson
It’s interesting. The societal narrative about risk is often the opposite of the truth. You’re told that starting a business is ‘risky’, but as I’ve just shown you, there are low-cost ways to start a business.
Many of the things you’re told are safe are sitting on top of dynamite piles of risk:
- Homeownership – Lose your job or watch the economy tank and all of a sudden this ‘safe investment’ becomes very risky, especially if you bought ‘too much house’
- Employment – Most people choose employment because it provides a higher measure of security than working for yourself. On the surface, this is true. But, as we can all see, job security is a myth. And unfortunately, many people build bad habits because they never think they’re going to lose their jobs. So when the tide goes out, they’re swimming naked. Nassim Taleb says it well “The three most harmful addictions are heroin carbohydrates and a monthly salary.”
- Education – Let’s just say giving an 18-year-old an $100,000 loan for any sort of education doesn’t always lead to success. You’re told education is a safe path to a better life but is being leveraged for six-figures with shrinking traditional employment prospects even worth it at this point?
In general, you’re taught this narrative about avoiding risk that actually ends up putting you in a ton of risk. Who’s living a riskier lifestyle? An employee with tons of debt or a debt-free entrepreneur or freelancer with an ‘unreliable’ income?
You’d have to judge case by case, but often engaging in riskier activities creates a level of security because you develop a higher level of awareness.
Who’s more likely to be more careful with their finances? Someone with a regular paycheck or someone with an income that varies?
Who’s more likely to stay on top of the latest trends in their industry? Someone who gets paid the same amount no matter what or someone who’s incentivized to innovate and continue to make little bets seeking a higher payoff?
Who’s more alive?
The little bet lifestyle gives you the excitement of uncertainty while reducing the chance of experiencing the pain of catastrophic failure. Also, you can build a bridge to this lifestyle in a pretty safe way.
How to Properly Execute the Strategy
“The only truly safe thing you can do is to try over and over again. To go for it, to get rejected, to repeat, to strive, to wish. Without rejection there is no frontier, there is no passion, and there is no magic.” – James Altucher
The gameplan for success in 2020 and beyond is simple. Keep your job. Keep the stable areas of your life stable and make little bets in your spare time. Maybe you start a side business or become a content creator. Maybe you take a small portion of your money on the side an invest it.
Not even for financial gain, but for fun, you can try all these little projects in your spare time. Once you find something that sticks, grow it until you feel safe enough to make the leap.
I worked on my writing for five years while maintaining a full-time job. When I went full-time, I had a cash reserve and had been making more money with my side hustle than my job for six months straight.
Do I still face risks? Absolutely. Is there a scenario where I could get wiped out? Sure, there always is. But I continue to plan my life in a way where the bets I make are never too major.
I wouldn’t pour all my savings into a new business strategy. When it comes to business strategies, I make a bet small enough that I’m willing to lose every penny, e.g., spending roughly $10,000 to create my last book. I’m constantly on my toes, which keeps me from slacking off. Each day I create something new, something with a chance to take off.
You can build a life like this. You can do it slowly without ever having to risk your livelihood. If you don’t have a lot of money, you can always bet with your time. Learning something new is a little bet you can make in your future. We live in an era where you can create a new life by messing around on your smartphone.
There are so many opportunities for you to make a splash by simply dipping your toe in the water. To develop the attitude you need to take these small risks, consider the fact that you’re always risking something anyway. Always.
You’re making a bet regardless of what you do. Inaction is a bet. You’re betting that your future will get better, or at least not get worse if you decide to keep doing the same things you’re doing.
Often, you act in a way that makes the bet you’ll see tomorrow, which is never guaranteed. Jim Rohn says it well “the minute you were born, things got risky.”
You might as well aim for a life that gives you the best odds for success and see what happens next.