Understand how much of a long shot you are. A one in 20 bet might be a “good bet” if you can afford the downside AND you have a chance at a 1,000 to one payoff. But it’s essential that YOU GET REAL!
Some entrepreneurial endeavors entail more risk than others. Riskier bets require execution of the fundamentals just as much as the more conservative ones. But the riskier gamble on a unique and un-proven value proposition hopes to create a long-term competitive advantage, and a chance for an eventual home run.
One who has never worked in either the coffee- or food-delivery business is a long-shot to create a new business that promises to deliver 300 kinds of coffee to the customer’s doorstep within fifteen minutes of ordering. And yet, almost all radical change comes from industry outsiders. Great examples of this include Amazon (originally a unique approach to the book business, but now so much more) and Apple, in both the music and cell phone businesses.
Long shots can offer tremendous value based on the upside, but the calculations and risk/reward profile are quite different from the safer plays.
Nassim Nicholas Taleb reminds entrepreneurs: “Most of you will fail, disrespected, impoverished, but we are grateful for the risks you are taking and the sacrifices you are making for the sake of the economic growth of the planet and pulling others out of poverty.”
Thankfully, some entrepreneurs will still make the plunge.