
Paul Buchheit: Evaluating risk and opportunity (as a human) - paul
http://paulbuchheit.blogspot.com/2009/09/evaluating-risk-and-opportunity-as.html
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timr
I think about outcomes rationally, but these days, I tend to think about
opportunity cost a lot more intently. Sure, if you tank a startup, you likely
lose only your investment, and you'll probably learn a lot. Problem is, you've
also just spent N years of your life doing little but working like crazy.

If you're lucky, you've got about 80 years to enjoy on this planet. You've got
about 15 of those as a young adult. How much are they worth?

(And just to pre-empt the obvious reply: yes, you might enjoy working more
than anything else. If so, more power to you. I'm only saying that you've got
to take opportunity cost into account.)

~~~
lionhearted
> Sure, if you tank a startup, you likely lose only your investment, and
> you'll probably learn a lot. Problem is, you've also just spent N years of
> your life doing little but working like crazy. If you're lucky, you've got
> about 80 years to enjoy on this planet. You've got about 15 of those as a
> young adult. How much are they worth?

I have recently come to the thinking that a life in search of fun and
happiness leaves one feeling empty in the longer term, where a life with
intense focus on a cause you deem worthy will have plenty of fun and happiness
along the way.

Now, most people are kind of in a borderland where they're not focused on
something intensely purposeful, nor are they enjoying their life. It's a sort
of limbo. But to get out of that, I think focusing on finding something worth
striving hard for that will produce plenty of short term joy and enjoyment to
go along with long term fulfillment.

~~~
iron_ball
_intense focus on a cause you deem worthy_

Such as, to pick a startup at random, online ticket sales? Is that -- by
itself, without any consideration of reward or profit -- worth the sacrifice?
The answer for this, and for 99% of other startups, is HELL NO.

~~~
lionhearted
Business is just problem solving. It's like playing a slow paced, higher
stakes video game that you get real money for beating instead of virtual
money. Now, it's more complicated than even a complicated game, and the rules
or winning conditions aren't always clear. But once you get acclimated, there
can be a sublime beauty and enjoyment to doing almost _any_ sort of business.

Smart people who don't initially like the more persona-driven types of
business often become the best businessmen. Engineers, etc - business is just
critical thinking, and getting it done. I've found enjoyment in many types of
business, and just "doing business" (solving problems) is a right good time.

~~~
californiaguy2
At the risk of sounding crude, I experimented with all sorts of drugs and sex
in college, but the best high I've found yet is scoring business.

Maybe I am a money loving robot, but that's my position on the matter.

------
dbul
You can very roughly divide techies into a few groups: people who would rather
work for a salary, people who are ambivalent about a salary job and starting a
startup, and people who have made it their mission to start a startup.

For the first, there is probably some satisfaction in helping people's XML-
based loan transactions reach the bank, etc. Y Combinator is perfect for the
second group -- they can give it a shot and if they fail, hey, they'll
probably have a great story to tell their interviewer. The last group probably
realizes the odds are against them, but with enough attempts they think
they'll make it (and if not they loved doing it anyway).

I'm definitely in the third group. The way I evaluate risk and opportunity is
I imagine what kind of a life I could live: As an employee I could have a
positive effect on thousands of people who need the utilities I'm building for
them. As a researcher I _might_ accomplish something on the order of curing
Polio.

But I have too many things I want to do and it requires capital to get them
all started. Otherwise, it would take many lifetimes to do them without
capital. I want to experiment with creating projects that have a positive
impact on society. So for me the risk is minimal considering if I don't try to
create a successful startup, I'll be miserable. I'm just not the type of
person who can settle for a job. Sometimes I wish I were, but I'm not.

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mr_luc
This is your human lint:"its," not "it's." Second paragraph, '20 percent of
it's value.'

/me goes back to reading.

Edit: okay, finished. Great observations.

> "[...] These things all raise the expected value (in my mind at least), so
> if they are mostly true, and I'm excited about the best-case outcome, and
> I'm comfortable with the worst-case outcome, then it's probably a good
> gamble."

'If I'm excited about the best-case outcome ...'

This can be a big problem for some people.

I like difficult things, but I'm excited by freedom, and the "best-case"
outcomes for a lot of my really 'ambitious' ideas just don't sweep me off my
feet. If the best outcome is lots of money for lots of work, for instance ...
well, I do lots of work for no money at all right now, but is it worth
shouldering that "moral weight" that I hear doing an ambitious startup
entails?

A best-case outcome for me is one that I produced without committing myself to
do so. Maybe I'm just a coward, or maybe I've just been burned by committing
myself too rapidly in the past.

I'm doing a startup, but it's really just a small business with some friends
that happens to run custom software. Maybe it'll turn into something more, but
I'm not committing to that!

;)

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sujaym
I think the "IF" part from "If I'm comfortable with the worst-case outcome,
then I can move without fear and focus my attention on the opportunity" is the
most important part.(Assuming I have clearly evaluated the risks) People
probably take it for granted that they are comfortable or focus more on
avoiding the worst-case outcome than focusing more on the opportunity.

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nostrademons
I try to think about the best case, the worst case, _and_ the most likely
case, and also how easily each of those cases are avoidable.

For example, the worst case for starting a startup isn't that you learn a lot.
It's that you continue the startup well past the point where you're learning
anything, chasing a dream that was impossible to begin with, passing up other
opportunities that would be far more productive.

But this outcome is fairly easy to avoid, and entirely under your control. You
just have to take stock periodically and have the courage to call it quits if
it becomes obvious that you're on a fool's errand. Basically, re-evaluate risk
and opportunity at each step along the way to see if your upside is still the
upside you thought it was, and if any further risks have accumulated to the
downside.

~~~
llimllib
> But this outcome is fairly easy to avoid... You just have to take stock
> periodically and have the courage to call it quits if it becomes obvious
> that you're on a fool's errand

It's only "easy" in the same sense that it's easy to make money on the stock
market; you just buy low and sell high.

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riffer
If I had to choose between going through life provincial, delusional or
cynical, I would definitely choose some blend of delusional and cynical.

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yters
Another thing ppl dont do is think about their historical peer group. In their
immediate peer group what they are doing might be considered daring and
pushing the boundaries. But, they don't stop to consider that such things have
been done innumerable times before, and they are in good company.

Plus, I'd rather use my life on some fringe theory with potential high payoff
(intelligent design) than stick with the crowd. I'm only one life out of
billions, and most don't take the risk to expand humanity's horizons, and most
spend their lives pursuing pleasures. So, I'm not hurting anything by being
risky, and the potential loss of pleasure is only one iota out of a vast sea
of pleasure experienced throughout the ages.

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edw519
_I think the most common technique is to ask ourselves, "What is the most
likely outcome?", and if that outcome is good, then we do it._

For those thinking logically, yes.

Many others (not hn readers, or course) ask themselves, "What is everyone else
doing?"

    
    
      Marge: What on earth possessed you to get an earring?
      Bart: Milhouse has one.
      Marge: If Milhouse jumped off a cliff...
      Bart: Milhouse jumped off a cliff? I'm there.
    

[EDIT: Oops, I forgot the </sarcasm> tag. I keep doing that. Obviously, we all
make many decisions by following the crowd. Those of us who pride ourselves in
being logical would rather not admit it except for the most minor decisions.]

~~~
cperciva
_Many others (not hn readers, or course) ask themselves, "What is everyone
else doing?"_

Are you seriously saying that HN readers aren't prone to jumping on
bandwagons? To the extent that the HN readership is a microcosm of the silicon
valley startup culture, this seems profoundly inaccurate -- I can't think of
any group more prone to imitation than silicon valley startups.

(Obviously there are some exceptions -- and the exceptions are the successful
companies which we all hear about.)

~~~
brlewis
I used to jump on bandwagons, but then I changed and started thinking all
decisions through on my own, because I noticed that's what everybody else on
hn was doing.

~~~
nostrademons
Me too!

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juvenn
"...[E]ven if you're ok with dying, that outcome may cause unacceptable harm
to other people in your life."

