Wednesday, 10 September 2014

Billy's Thirty-first Law: Know what kind of entrepreneur you are.

I hate to lose more than I love to win.
Jimmy Connors
I know that sorting things into two groups often oversimplifies live.  It's sort of like the old joke that there are two kinds of people in this world, those who divide people into two types and those who don't.  (Have you ever noticed that referring to an 'old joke' is a euphemism for a bad joke?) I am going to succumb to that most banal of all temptations and do just that, hoping for a better idea for next week.
Entrepreneurs are by their very nature competitive.  There are two ways to look at competition...winning and not losing.  They may appear to be the same, but they are very different.  Those who Hate to Lose are different than those who Love to Win...and knowing which type you are may help you better understand your natural bias when making decisions.

Most people are more afraid of losing than they are programmed to win.  in investment theory we call this prospecting theory.  Given the choice between a guaranteed $50 and a 50% chance of winning $125, most people choose the $50 sure thing.  The logical choice, based on mathematical expectation, is to take the 50% chance of winning $125, as it has an expected value of $62.50.  The difference, $12.50, is the premium paid to avoid losing.

Entrepreneurs are not like most people.  Some hate to loose, others hate to win, but we all play the game.  Most people take the safe choice and get a job.  If your mother has ever asked you when you are going to get a 'real job', then you know exactly what I mean. 

With this in mind, I have put together some thoughts on both of these entrepreneurial types.  See if you recognise yourself and if the strengths, and weaknesses, apply to you.

Hate to Lose

I can relate to the hating to lose type because, I hate to lose.  My business partners wanted to embark on a software development project. My rule was that I wouldn't be out of pocket for any part of it. I was willing to risk my time, but not my money.

Here are some characteristics of the 'Hate to Lose’ (HTL) entrepreneurs.

1.      HTLs have trouble ‘cold calling’ as the chance of rejection is higher than calling on a pre-qualified lead.

2.      HTLs sometimes leave money on the table wh          en negotiating on price, for fear of losing the job.  Ironically, I teach price theory, yet often underprice my own services.

3.      HTL’s are often too slow to spend money or take action, for fear that it will cause more harm than good or that the action will result in failure. 

4.      HTL’s tend to have high success rates, but we often miss growth opportunities. We would rarely have those, bet the business moments.

One of the reasons I stopped reading seminar feedback is due to one scathing review.  I thought the session went well. Twenty-six of the Twenty-seven participants thought it was great.  The last one hated the session and hated me. I use humour to illustrate points.  Since this was a marketing seminar, the jokes are much funnier than in financial seminars.  The humour always illustrates an underlying business truth. This critic ripped me, my humour, the session and the relevance of the material.  One comment was, "If I wanted jokes I'd go to a comedy club." 

Everybody else loved the humour, the content and the session, but guess who I remember.  Now, the only thing I hate more than losing, is tying, so I refuse to change my style. I would rather lose than be bland.

Love to Win

Love to win people are less risk averse.  As they are not afraid to lose, they have far less hesitation when setting new goals or executing new tactics. They worry less about the consequences than the rest of us, giving them more comfort trying new things. Characteristics of the ‘Love to Win’ (LTW’s) group include:

1.      LTW’s are great at cold calling, but often execute customer acquisition strategies that ignore existing customers.

2.      LTWs forget about the core business when doing something new.

3.      LTWs fail to anticipate the ‘unintended consequences’ of the new strategies they execute.

4.      LTWs are often those who follow their gut feelings, rather than those who analyse situations and act accordingly

Many successful business partnerships balance both types.  This is a great way to fill in the gaps.  In my preparation for this blog entry, I asked a friend, who ran a very successful tool & die business, which of these he considered himself.  “I hate to lose” he replied…”but my partner, he really loved to win” I have had two partners who were exactly the same. 

Sometimes, we can change positions. My friend Mel and I have been friends since high school.  We wrestled together, even faced each other in a tournament. (He won)  If we were together when the coin toss challenge was issues, we would both choose the 50% chance of winning more money.  Neither of us would want to ‘wimp out’.  Many entrepreneurs are the same…we may have a dominant style, but that does not prevent us from moving when the opportunity is right.  Entrepreneurs are, if nothing else, flexible!
This is less about better or worse, and more about self-awareness and knowing how you make decisions and how those natural decisions may have a built in bias that will work against you.

No comments:

Post a Comment