How to Make Business Bets

Boxing.

1. Mike Tyson.
2. Buster Douglas.

1990.

• Tyson = heralded as the greatest ever.
• Buster Douglas barely squeezed into the title fight.

The odds:

• Tyson 40:1 favorite.

Only one casino in Vegas offered bets for the fight.

What'd folks do?

• "Tyson won't lose this one."
• "This is a sure thing!"
• "Let's mortgage our house on this fight!"

That Saturday night, Douglas downs Tyson.

Result?

• Folks lose their homes.
• Folks lose their businesses.
• Folks set themselves financially back for decades.

Even if you think your business idea is a "sure thing", and you get the idea to pour your life savings into it, one variable could destroy you.

Nothing is a sure thing.

People + Foreclosures

It's simple to blame Wall Street; but, doing that just teaches everyone to blame others when we lose.

What lessons can we take away from the mortgage crisis?

1. Nothing is a sure thing.
2. Don't spend what you don't have.
3. Only make a risky bet when you can afford it.

When you're investing, tack this:

• "If this one investment totally blows our face, will we stay in business?"

That keeps you from:

1. overspending
2. speculating
3. making risky bets that can destroy you

Yes, you can't grow big without taking a big risk; but pouring everything into an unsure thing -- despite all the clear signs -- will ultimately destroy you.

The ideal model:

1. Big risks = to grow.
2. Conservative bets = to stay in business.

Do 'em both.

Big. Affordable. Bets.

If you enjoyed How to Make Business Bets, get a complimentary subscription to our freshest articles through email or through your feed reader.