On Making Your Own Luck

Ziya G. Boyacigiller

This presentation was created and given by Ziya Boyacigiller who was leading Angel Investor and a loved mentor to many young entrepreneurs in Turkey. We have shared it on the web for everyone’s benefit. It is free to use but please cite Ziya Boyacigiller as the source when you use any part of this presentation. For more about Ziya Boyacigiller’s contributions to the start-up Ecosystem of Turkey, please go to www.ziyaboyacigiller.com

On Making Your Own Luck…

Ziya G. Boyacigiller

Make Your Own Luck12 PRACTICLE STEPS TO TAKING SMARTER RISKS IN BUSINESS

by Eileen C. Shapiro & Howard H. Stevenson(with occasional additions by ZGB )

Note – this presentation uses animation, therefore you are advised to view in

the Slide Show mode.

The Test

How often do you bet on behalf of others or for yourself?

a) Many times a dayb) Once or twice a dayc) Several times a weekd) Several times a monthe) Several times a yearf) Very rarelyg) Almost never – I make it a policy not to gamble

The Answer Key… a, b, c : EVERY ACTION IS A BET !

d, e, f : are only the biggest or most uncertain actions

bets?

g : you will discover a new way of looking at

your life and business…

“Human actions are always rooted in a

forecast of those actions.”

Alan GreenspanRetired Chairman of the U.S. Federal Reserve

We are forced to make “bets”… Your company is the price leader in its category. You see

a way to boost your bottom line by raising prices. Should you do it?

You’ve been disappointed with your performance review and bonus. Should you quit?

You have found a new building for your company at a great price in a run down neighborhood. Should you buy it?

You have interviewed a candidate for an important job. Should you hire her?

…when we don’t know everything we would like to know.

Therefore, you can conclude that success or failure hinges on dumb luck.

But, great decision makers (including Bill Gates and Warren Buffet) don’t depend on luck. They make their own luck.

And now you too can learn how to this.

Sketch a Flow Chart of the Key Components of a Bet

Intent Action Result Satisfaction

DESIRED RESULT

PREDICTIONS

ABILITY TO PREDICT WELL

Predictive Intelligence All human actions are based on intent…

But not all humans are good at predicting…

PI is the level of how able each of us is to act in the face of uncertainty to bring about desired results

… and your PI level can be improved

Build Your Predictive IntelligenceThe OOPA! Process

(Gambler’s Dozen)

Orient & Organize1. The Big Goals: What future

am I trying to create?2. Upside/Downside: Will this

gamble be worth playing for me?

3. Jump Bets: Do I need to make a radical shift now?

4. Campaign Plans: Who/What will I need and how will I get them?

5. Implicit Strategy: How much magic will my current bets require?

6. Plan B: What’s the best I could do if my existing plan gets blocked?

Predict & Act!7. Predict Maps: What’s the

future space I’m betting into?

8. Wallpaper Jujitsu: What are my best “left-side” bets?

9. Risk Splits: How much risk can I shed or shift?

10. Point of Action: What’s the “it” I’m betting on?

11. Domino Effects: Will I be locked into a tight set of follow-on bets?

12. Game Over: How will I know when to call it quits?

Four Requirements to Apply OOPA! Successfully1. Cover all the steps,

(OK not follow the same sequence)

2. Write down your thinking for each step.(Rough notes, or sketches are OK – but put your bets down specifically, on paper)

3. Go fast, especially for the first step.(First, use seconds or minutes for each step – then refine if necessary – use more time for more important decisions)

4. Remember that the sole purpose of this process is to bet better.(OK not to achieve perfection…but make the effort!)

Orient & Organize 1. The Big Goals: What future am I trying to create?

You are stranded on a deserted island.

If you could choose one person to be with you, who would it be?

The Big Goals: What future am I trying to create?

“100 Marbles”

In any situation, you have a limited set of resources to place at risk – time, money, reputation, effort…

How do you want to bet your 100 marbles?

The Big Goals: What future am I trying to create?

Application

1. Focus on an area, and make a quick Laundry-List of objectives.

2. Pick the Lead-Dog that will move you in the direction that will give you the most satisfaction at the end (use value scan).

3. Look from the future back to where you are now, and Prune any extraneous options.

---

---

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Orient & Organize 2. Upside/Downside: Will this gamble be worth playing for me?

Should I invest my 100 Marbles? (All or how much should I invest?*)(Values and perspectives differ – J.C. Fields contest & Philadelphia…)

Your option is not to invest your marbles

and to wait for a more favorable

situation…

2. Downside: How much can I afford to lose if all goes badly?DO NOT get wiped-out! (Which assets am I risking, and how much of each?)

3. Who controls the rules?

1. Upside: How much can I gain if all goes well?

* Read Fortune’s Formula for more insight…

Orient & Organize 3. Jump Bets: Do I need to make a radical shift now?

Jump Bets have 2 characteristics:

1. Disruptive – upsets your plans, not comfortable(being wrong is right – look for lateral paths– betting is a forward activity, based on current predictions not past…)

2. Narrow Window of Opportunity

3. Ask yourself if later on you will say: “I wish I had…”

4. Verify what you can fast; and then act quickly!

• Neon Clues:Story of assigning engineers to new product line…

• Fuzzy Clues:Story of GE about to sell the company…

Orient & Organize 4. Campaign Plans: Who/What will I need and how will I get them?

1. Core Allies:Your values and interests align with theirs

YOURVALUES

&INTERESTSYour goal is to convince them to share their marbles with

you…

2. Possibles:Situationally, your values and “wants” overlap with theirs(Use empathy to understand them and win them over, use negotiation to make deals)

3. “Null-Set”:You have no overlap, in fact your values and interest may conflict with theirs

Orient & Organize 5. Implicit Strategy: How much magic will my current bets require?

People think bets they are placing (strategy) will get them to a desirable outcome,

when “real bets” they are placing (“implicit strategy”) are leading them someplace else…

They will need a lot of magic to get them anywhere close to a satisfactory outcome.

Implicit Strategy: How much magic will my current bets require?

Hope is not a strategy!

Implicit Strategy: How much magic will my current bets require?

1. Identify the currency of the “bet”s• Poker chips• Companies cash• Military soldiers• Weight calories

2. Quantify using currency to identify where the real bets are (i.e. lower confidence level) Do sales model plus P&L spreadsheets with assumptions and confidence levels.

3. Test the bets & use Focused Creativity to improve the odds of winnings

• Do you depend on skill/knowledge or luck (confidence level)?

• Can you take a series of smaller bets (with higher confidence level), rather than one big bet (strategy map)?

• Can you eliminate causes of failure in advance?

? ?

?

?

Orient & Organize 6. Plan-B: What’s the best I could do if my plan gets blocked?

Develop a Plan-B before you need it!Fire

SafeHouse

Plan-A:Reduce

Probability

Plan-B: Reduce

Seriousness

•Eliminate matches

•Use automatic fuses

•Do not store flammables

•Fire extinguisher

•Fire exit

•Smoke alarm

Is Risk= (P x S)

low*?

* Use Pareto principle to prioritize risks

Predict and Act! Skills

Betting analogy helps us to think about the predictions we’re making,

about key factors outside our control

before placing our wager (act!).

This focuses us on disciplined forecasting of the factors that will have the biggest impacts on future outcomes. (PA! skill)

We will now focus on how to determine the potential options and choosing which to pursue.

Predict & Act! 7. Predict Maps:What’s the future space I’m betting into?

1. Smart bettors reject the notion that higher returns always entail higher risks.

2. We need to go fast…

3. Predict Maps helps us to do these. Relative Uncertainty

LOW HIGH

Rela

tive Im

pact

LO

W

HIG

H

Range of potential returns on our bets, including both potential future gains and losses…

Risk of betting on the wrong side of a prediction, which occurs when you think a factor is going to move in one direction, and it moves in the other…

Predict Maps:What’s the future space I’m betting into?

Wallpaper Zone:Like the wallpaper, factors often ignored, but can be very powerful.

rat holezone

ant colonyzone

wild cardzone

wallpaper zone

Relative Uncertainty

LOW HIGH

Rela

tive I

mp

act

LO

W

HIG

H

Ant Colony Zone:Like ant colonies, many of these seemingly unimportant factors put together can create substantial advantage.

Wild Card Zone:These predictable factors can work massively in your favor – or against.

Rat Hole Zone:A hole you’d rather not be in…

Predict Maps:What’s the future space I’m betting into?

rat hole zoneHow many troops? 300 or 600?

ant colony zoneBritish will fight as trainedWill wear red uniforms

wild card zone Don’t know when exactlyBy land or sea?

wallpaper zone British attacks, very

soon, imminentTargets: Lexington or Concord

Relative Uncertainty

LOW HIGH

Rela

tive I

mp

act

LO

W

HIG

H

Using wallpaper and ant colony factors, Americans beat British… They also shifted risks in wild card by using signaling with lanterns.

Predict & Act! 8. Wallpaper Jujitsu: What are my best “left-side” bets?

Wild Card Zone has factors outside your control

Wallpaper Zone has factors within your control. It is less risky (and easier, and effective) to leverage these to move towards your goal.

Use lateral thinking to create: new wallpaper factors, or revise existing wallpaper factors

At the end, use empathy to test for traps (understand others’ motivations and thinking).

wild cardzone

wallpaper zone

Relative Uncertainty

LOW HIGH

Rela

tive I

mp

act

HIG

H

Understand the world from the other side’s point of view well enough to make intelligent predictions about what they are likely to do next and under what conditions…

Predict & Act! 9. Risk Splits: How much risk can I shed or shift?

You’re in New York one day, or Hong Kong, or Istanbul. You come across a street game in which a player is tossing a coin. He has just tossed 10 times in a row straight heads.

He invites you to bet on the next toss of the coin at even odds, and indicates that you can choose how much money to bet.

He tosses the coin in the air.

What bet do you call?

Risk Splits: How much risk can I shed or shift?

Navigating the right side of the Prediction Map is a fact of life, in business as well as out.

The key is to ways to structure bets that reduce the risk of taking the wrong side of the wager, in two steps:

1. Decompose the situation to understand the uncertainties and potential costs decide if you have to play, or even want to play.

2. If we decide to bet, restructure the wagers to reduce or redistribute as much of the risk as we can (unless we are getting a disproportionate reward for the risks we are taking).

Risk Splits: How much risk can I shed or shift?

Outcomes – Odds - Consequences

2. You win if you bet tails

1. You win if you bet heads

3. Dealer’s choice

4. Dealer’s choice.

Will use sleight-of-hand to switch coins

Will not use sleight-of-hand to switch coins

This coin is

weighted for heads

This coin is

weighted for tails

Odds ?

Risk Splits: How much risk can I shed or shift?

It’s easy to see bets in hindsight, of course, because by then the uncertainties are resolved, and the Wild Cards are wild no more.

Uncertainty Grid gives you the opportunity to manage risks, before your know the answer.

Ask for each quadrant:“If I could tell you now, for certain, that in a year this will be the situation you will be in, what bets would you then wish that you had made now?”

and take 5-10 minutes to answer this..

Predict & Act! 10. Point of Action: What’s the “it” I’m betting on?

Intent Prediction Action

OK to go in any order, as long as all three are verbalized.

Most people go, more easily,:Action Intent Prediction

Do these steps – be disciplined:1. Write each step on a slide. 2. Check for consistency between these 3 slides, 3. If you find inconsistency, redo your bets and redo

the slides to reflect your new plans.

Point of Action: What’s the “it” I’m betting on?

Iridium “It” – Action (Content of It) Customer purchases Iridium service and also the phone. Iridium service covers all parts of the globe, including places not

covered today – ships, oil rigs at sea, remote locations (Arctic, Amazon)

Allows cross-border communications between countries with conflicting telecoms standards (roaming)

Iridium phones need direct line-of-sight from phone to satellite; often don’t work in buildings, under trees, or in dense urban locations,

Can fit phone with special oversized antenna to help with this problem,

Base phone is 7” (18cm) long (without antenna) and 1 pound Price to purchase phone is $2200-$3400 Usage fees, $2-$7 per minute (can’t reduce this cost in future due to

satellite capacity)

Point of Action: What’s the “it” I’m betting on?

Iridium “It” – Intent (What Outcomes and Why) Outcomes we want to achieve:

Sign on 50,000 customers per month in 1999 (=600,000 in total) Even with slippage, sign on at least 400,000 customers in total by end

of 1999

Value of these outcomes to us: Breakeven volume is 400,000 subscribers, Loan contracts require us to have at least 52,000 subscribers by end

of March 1999 If we can hit at least 400,000 subscribers by end of 1999, we can go it

alone or sell external sources on another round of financing.

Point of Action: What’s the “it” I’m betting on?

Iridium “It” – Predictions (Forecasts and Confidence Levels Odds) Core predictions, satellite based mobile phones:

Satellites will be best way to provide worldwide mobile service, People in business, military need cross-border coverage, Our service competes with outrageous hotel charges or no service at all, Future satellite phone market: 12 million users by 2002 and growing, 400,000 user in 1999 viable since 400,000 is small percentage of market.

Environmental scan, ground-based vs satellite-based mobile phones: Ground-based mobile coverage growing fast everywhere Cross border problem diminishing – GSM becoming single European standard

with 150 million subscribers predicted for 1999 Ground-based mobiles work indoors and in dense urban areas – Iridium don’t Much cheaper usage fees for local calls – 9-11cent per minute – and

international call to/from most locations Competition has much smaller and less costly handsets – Motorola StarTec in

1998 at 4 “ long, 3 ounces, $600 before discounts,

Predict & Act! 11. Domino Effects: Will I be locked into a tight set of follow-on bets?

Two quick tests:1. Does the bet you are about to take

involve a known and consistent sequence of steps?

2. Can significant resistance be expected to the results you are trying to achieve (and who has the negotiating power)?

Predict & Act! 12. Game Over: How will I know when to call it quits?

You are invited to a buffet – most wonderful food and drinks…

You can eat and drink as much as you like, and stay as long as you wish.

However, you cannot take any food away with you when you leave, and you cannot come back.

When do you call it quits?

Game Over: How will I know when to call it quits?

PROFILE SATISFACTIONWITH RESULTS TO DATE

PREDICTIONABOUT RESULTS OF NEXT ROUND, SAME

GAME

INTENTFOR NEXT ROUND/KIND

OF RESULT NOW DESIRED

A?B?C?

HIGH LOW MORE TO GAIN

MORE TO LOSE

WANT MORE OF

SAME

WANT OTHER THINGS

1 X X X A

2 X X X A

3 X X X B

4 X X X B

5 X X X C

6 X X X C

7 X X X C

8 X X X C

A= STAY, B= GET OUT OF THIS, GET BACK IN OTHER, C= GET OUT OF THIS TYPE

Four Requirements to Apply OOPA! Successfully1. Cover all the steps,

(OK not follow the same sequence)

2. Write down your thinking for each step.(Rough notes, or sketches are OK – but put your bets down specifically, on paper)

3. Go fast, especially for the first step.(First, use seconds or minutes for each step – then refine if necessary – use more time for more important decisions)

4. Remember that the sole purpose of this process is to bet better.(OK not to achieve perfection…but make the effort!)