Contrast these two points of view:
“Dude, as soon as I get up a little, I take my profits and walk away.”
“Roulette is a game for greedy people. I’m either tripling my money or going home with zero.”
I heard both statements while I was in Vegas over the past few days. The first one was two college kids on spring break that were trying to preserve capital (or in their parlance, “have enough money to get hammered tonight”). The second was made during a marathon five hour roulette session by an indonesian entrepreneur who was regularly raking in 10-15k per win, and walked away from the table up $30,000 bucks *after* paying off his 10,000 dollar casino marker.
And that got me thinking about entrepreneurship, investing, risk — and specifically “pressing your bets.”
Anyone can go to Vegas on a budget, set your capital constraints for each day (i.e. how much money you’re going to lose daily), and have a grand ole time just grinding it out at the craps tables. But not just anyone can be grinding it out at a table game (be it craps, roulette, black jack or even poker), and know *when* and *how* to press your bets. In fact, good VCs, entrepreneurs and startup guys and gals of all stripes spend a lifetime figuring out the when and how of pressing your bets. Because here’s the thing: if you don’t press it at some point, then you’re the college kids managing your capital for drinking money, and not the guy walking away from the roulette table up 40k in 5 hours.
(side note: If you’re not familiar with the term “press your bets” – it refers to when you win a bet and instead of collecting your winnings, you tell the dealer to “press” it — i.e. to put your winnings back on the table in some fashion. If you never press your bets and place bigger bets, than the casino’s house advantage will *always* win over time.)
The art of it, then, is A) *when* to press your bets and B) how to press your bets.
In the startup game, I’m still learning this. And I think any VC or entrepreneur that’s being honest will tell you that learning when to press and how (whether that’s a product risk, capital risk, human resources risk, etc) to press are life-long learning processes. With that in mind, a few simple rules for pressing your bets:
1. You need a win to be able to press: You can’t just get into a game and press your bets. By definition you have to have won *something* (no matter how small). Similarly, you don’t enter the startup game and bet the company on the first roll of the dice. You’ve got to get some win — release the product, land a first customer, something.
2. You press when you get “on a roll”: Statisticians will tell you that there’s really no mathematical basis for thinking you ever get “on a roll” at a table (excepting blackjack). Gamblers will tell you otherwise. And when a roll hits, you’ll know it. Suddenly, it feels like the wind is at your back, and you can do no wrong. The hard part about rolls is recognizing that they’ve started before they’re over, while not mistaking a non-roll for being a roll too early. How do you do that? Practice. And when you’re on a roll, press. Press hard.
3. When you do press, press without fear: You’ve got a win under your belt, it looks like you’re on a roll, and you’ve decided to press it. Fine – do so without even the smallest bit of fear. Like a guard dog, the gods of risk management can smell it on you when you’re scared. Be the guy at the roulette table — when you press, you decide that you’re going home up big, or with zero.
4. If the “roll” isn’t coming, don’t get anxious; walk away: Sometimes, the roll never comes. Sometimes, you pick up your chips, down a little bit, and you walk away. Failure’s okay. You paid to learn. And that’s worth something.
5. Lastly, if you do get on a roll, and you’re pressing and winning – tip your dealer: This holds true in startups and Vegas. You didn’t get here without help. Be kind to those that gave you a hand when you were just buying into the game.
At the end of the day, all gamblers rely on pressing their bets — and learning that skill is really what defines someone who knows what they’re doing versus someone who doesn’t. That’s the nature of the game. The only way to change that is to be the house. 😉