High Conviction Asymmetric Bets
Making decisions that can fundamentally alter the trajectory of your life forever.
The title of this post is a mouthful.
However, at the crux of highly successful individuals and companies, one will always find a high conviction asymmetric bet that paid off.
If we were to break down the title into two:
High Conviction
In a prior post, I spoke about how we need to avoid good opportunities and wait for great ones. For us to sincerely believe that an opportunity is great, there are two prerequisites.
Firstly, we need to have put in the work to have a strong opinion. To take a position which may not be a consensus view. When something has become obvious, it is easy to have high conviction. When we hold contrarian thoughts about the future with strong opinions, we can unlock the true alpha in life.
Secondly, we need to have a high level of self-belief and confidence. Without this component, we may loosely hold high conviction opinions for a short while. The first sign of trouble we are more than likely to fold our hand when things heat up.
Asymmetric Bets
An asymmetric bet is one where the potential upside is much greater than the potential downside. One of my favourite books on the topic is Black Swan, and I would highly recommend it.
Not every startup idea has an asymmetric payoff. On the surface, it may appear so. However, we are usually heavily discounting our time value and energy required to achieve an optimal outcome.
Asymmetric bets in the moment are difficult to place. The alternatives are usually stable bets where the outcome is more or less known. While gamblers regularly make asymmetric, they do so without any strong opinions or thought.
High Conviction Asymmetric Bets
When we join both terms together, that is where the magic happens.
I have strong opinions about the future of work and have been running a fully distributed company since 2013. With the pandemic, the acceleration of the adoption of this way of working has dramatically accelerated. While this may seem apparent today, it is a view we have held for a long time. I believe organizations in the future will heavily rely on async communication patterns and the tools to support that future do not readily exist today.
We are investing heavily in the development of a product that aims to solve for that view. While the downside of the investment is limited, if we are correct, the upside would be creating an extremely valuable company. I could invest the money in far less manner that would give me a decent return. However, the payoff would be far from asymmetric.
🧰 Resources
📝 No “yes.” Either “HELL YEAH!” or “no.”
The seminal piece of advice from Derek Sivers that has been recounted on many ted talks and podcasts. This gels very well with the advice on avoiding good opportunities and waiting for the great ones.
📝 The Work Required to Have an Opinion
Today everyone has an opinion on every subject matter. This article by Shane Parish is one of my favourites. It is all about having the intellectual humility to challenge our beliefs and work hard to have the opinions we hold dear.
📚 The Black Swan: The Impact of the Highly Improbable
This is the book where I understood the concept of asymmetric bets and how they play out in the world around us. This is a book I recommend highly to most people who are interested in looking deeper into the world around us.
📚 Thinking in Bets: Making Smarter Decisions without all the facts
As someone who played a lot of poker in my university days, this book was an awesome read. Written by a highly ranked poker player, this book breaks down the strategy of making better decisions with imperfect information. Which is something that entrepreneurs and ambitious high performers need to do every day.