Sitting at the table, you’re on a losing streak. What do you do? Pick up your chips and walk away or double down and hope for the best?
There’s that moment in every movie where the hero is faced with the gambler’s dilemma. Walk away a poor man or double down and go for broke.
As the audience, we know how it’s going to end, we roll our eyes at his decision and dig down into our seats to watch the impending train wreck.
It’s not so much different from real life.
Entrepreneurs are often seen as gamblers, mavericks who risk it all on the spin of a wheel or the throw of the dice. In reality though the business-savvy entrepreneur doesn’t just risk it all on a wild spur of the moment decision.
We weigh our options, review all the angles, think about the consequences, imagine all the outcomes and eventually settle on a course of action. Then we roll the dice.
To the outsider it seems like a crazy decision, but it’s not. It’s a calculated risk, not just a Hail Mary play.
Ok, sometimes it is a Hail Mary play, but hopefully at least a well considered one.
When I am faced with gambler’s dilemma, I use 4 key questions to help me make my decision:
What’s the opportunity cost? Cutting bait may be easy if you’re not that invested, but if I keep spending or even accelerate spend, what could I reasonably expect to gain? If the opportunity cost outweighs my risk, I consider doubling down.
How badly do I lose if I walk away? If you’ve invested a bit of time or money it’s easy to quit. Use a stop-loss mentality and pull the plug before you get in too deep. If however you’ve invested significant resources into a project, take the time to thoroughly review the consequences.
How does this decision affect others? Sometimes hard decisions influence others like employees, customers, investors or vendors. The people most affected may have options you haven’t explored, so consult widely.
What are the conditions I need to double down. Just like in poker, decisioning becomes easier when you have more cards on the table. When you can reduce your probability of failure, it becomes easier to make a winning decision. Spend time identifying key elements that indicate success or failure and use these to evaluate progress.
Stay on course by identifying bail points, criteria for defining success & failure and use these to make your decision based on sound fundamentals, not fear.
The real skill of course, is in listening to your inner voice and actually following your own advice.
As the song says, you need to know when to hold’em, know when to fold them and when to run 🙂