Poker, business, and the optimal decision

Written by on

When you reach a certain level of any topic, you realize how deep the rabbit hole goes. That's why the term professional, when used the right way, is so prestigious. When it comes to poker, the same is true. It's a deep game and most variants of pokers haven't achieved GTO (game theory optimal).

Sure, there's a generally agreed upon way to play most games of poker. Most often, aggression is the key to victory. But, most people think it's all about the numbers or the cards you're dealt; however, it couldn't be further from the truth.

Variables you must consider:

  • The number of chips you have (money in the bank)
  • The number of people still in the hand (people still in the game)
  • The person on your left
  • Your opponent's aggression
  • Your opponent's lack of aggression (most incumbents)
  • The number of chips in the pot
  • The number of chips on the table (the size of the market)
  • The person on your right
  • Your opponent's range of cards (their people)
  • Your cards (your people)
  • The list goes on and on...

You use all of these variables to make a decision. You should always ask yourself: What's the optimal decision? If you don't make the optimal decision, you might get lucky and still win. However, you're definitely more likely to lose.

If you do make the optimal decision, you're slightly more likely to win - but you could still lose. That's the catch.

Just like poker, business follows along. You can make all the right decisions, and you can still get unlucky. On the other hand, you can make a bad decision with luck on your side.

The best we can do is make optimal decisions. The optimal decision is the one which gives us the greatest chance to win.

And like business, poker is a long-term game. Over the short-term, any victory or loss is almost certainly due to a high amount of luck (variance). However, when you stretch your decisions over many years, the person making the most optimal decisions reduces the amount of luck effecting his results.

An example of this in business is the moat. Over many years, a company makes optimal decisions, creating many different mechanisms by which they keep their competitive advantage. Compare this to the company just starting out with one product. They need some luck to stay alive.

Even though we can try, it's impossible to always find the optimal decision. Your opponent may be great at altering his play to trick you into a less than optimal decision.

Sometimes the optimal decision is to just go with it. The same is true for business. Sometimes you just don't know what to do. That's ok. Make the decision and be ok with it. The important part is to reflect and study that decision. Knowing what you know after the fact, was it the optimal decision? If yes, you were lucky. If no, figure out why. Armed with that knowledge, you should be able to move toward more optimal decisions in the future.

Product Market Dance

Written by on

I've never really liked the phrase 'product-market-fit'. It's never felt right to me, in the same way the phrase 'passive income' doesn't feel right. They both imply that that you get to a point of stillness at which everything stops and you're 'done'.

But that's not how the economy works, and it's certainly not how technology companies and software work. 

Today's product/market fit might be tomorrow's myspace. The market is constantly shifting and evolving, and so too are the products that serve them. It's wise to remain focused, but not at the expense of missing an entire market shift that kills your company. 

Markets are alive, we have new devices and new pieces of hardware at our disposal and with more coming. Not only this, people's expectations change. Like the changing beat of a song as it reaches a climax and comes back down again, so too does the market, and your customers fluctuate.

Today's Minimum Viable Product is tomorrow's starting point. Interestingly, today's failure can be tomorrow's success too, because there is such a thing as being too early.

Here's another secret: within markets there are different songs playing. Our biggest competitor to Tula is a half-a-billion dollar company in what they call the 'health, beauty and wellness' category.

That's one song I suppose. Another? Independent Yoga Studios.

There are many songs playing in every market. 

There's no such thing as product/market fit unless you're talking about a short time horizon.

For anything longer, it's a dance.

 

Venture Ethics

Written by on

Fred Wilson, the well known technology investor and all around inspirational guy, wrote a blog post yesterday titled Ethics and Morals. In it, he wrote about a Venture Capitalist who turned down an investment opportunity with a company, and shortly thereafter provided an angel round for his son in a competing business.

There are more details, and the entire post is worth a read.

But one of the things with the post is he didn’t actually name the name of this venture capitalist. And that’s fine I suppose, but it prompted me to ask this:


I asked the question because this isn't the first time I've heard an investor call another investor out in public, without actually calling them out.

I recall Dave McClure calling out investors for blocking early stage investors from participating in follow on rounds (another thing Fred Wilson's written well about here), for example. 

There too - no names.

What I'd like to argue is that these public announcements, in and of themselves are problematic for entrepreneurs, are counterproductive to the investor's goals of attracting the best entrepreneurial talent, and underscore the very reason why people like me don't trust investors. 

To be clear, I don't mean this in the "I don't trust them personally" kind of way. My guess is they're both probably pretty awesome, their firms are the best in the biz, etc. I think they're the 'good guys' is my point. 

And also, Fred does yoga!

What I mean is, I don't trust their industry, and these non-outing outings help explain why.

To be good it seems to me investors have to simultaneously compete with each other, and collaborate with each other. This is so much grey for someone like me I can barely take it. And I don't mean this in a positive way about myself, I just mean it just sounds so damn hard.

But all I see when I read these non-outing outings is the fact that it's more important to protect the investor to investor relationship than it is to warn entrepreneurs about the shady investor.

And look, I get it.

I actually changed my mind in the process of writing this post about whether it was 'right' or 'wrong' not to mention names. We've had numerous investors reach out to us about Tula, while proudly including the fact that they invest in our main competitors. And all I can think to myself is: someone who wants to invest in us might be reaching out to our newest competitor in three years?

But I don't want to call these people out either.

What I initially thought was irritation that these investors weren't naming names is actually touching something deeper. How these dots connect for me now, is they highlight very clearly that there is an investment world, and there is an entrepreneurial world and in between there is a chasm of trust.

It makes me sad when investors I like and follow and admire are contributing to making this chasm larger instead of smaller, especially when they are each usually doing the latter.

But the fact of the matter is that they both have had a situation where they've fired shots across the bow at other investors, using a dog whistle instead of a bull horn, while on just about every other industry related topic they are talking openly and in public.

I think it's great that we're talking about ethics, but let's be clear, these are venture ethics, which still leave some open questions for the entrepreneur.

 

The most important metrics are impossible to measure

Written by on

The most important metrics are impossible to measure.

Of course, this doesn't mean nothing should be measured. And it certainly doesn't mean we can't gather important insights by measuring the things that can be measured. Avoiding the important work of measuring the measurable is neglect indeed.

But the very most important things, they cannot be measured.

How do you measure delight? How do you measure the number of people that signed up because of the one rabid fan that can't stop talking about you?

In a world where everyone is inundated with everything, how do you measure the impact of a billboard that sparks brand recognition while listening to a podcast sponsorship which reminds you to google something which causes you to click on an ad?

The truth is that now more than ever, insights are what matters.

Deep domain knowledge, the ability to weave things together and an ability to create solutions to problems that other people don't know exist are valuable precisely because they require insight.

The other thing to keep in mind is that 'not measuring' something doesn't mean 'neglect'. It means approaching something from a different angle. Maybe it means instead of doing a survey of customers about a feature, you have two in-depth conversations with your longest customers.

In a world where more things are becoming more measurable, I think it's wise to take a step back and think about the that which cannot be measured, and think about the kinds of inspiration they can provide.

Oh no, it worked!

Written by on

The only thing scarier than failing is succeeding. (Note that I said scarier, not worse.) Because every success takes you to the next level. There's no finish line, the stakes just keep getting higher.

Now that it worked, now what? There are real people counting on you now. Your investors expect a return now. Your employees are buying houses.

You're not experimenting, you're executing. 

If you go down, real businesses stop. 

You matter.

Now what?

This is the idea that pays for the bad ones. This is the one that justifies your philosophy. And it's success will enable more success, or so you think.

It worked. 

But it's not done.

Now what?