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.
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