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Lessons from the Small Bets Cohort (Part 3/6)

The overall themes of the 3rd cohort were opportunities and luck.

Daniel defines luck as the positive side of randomness.

In order to benefit from luck, we need to know 1) how to attract it 2) how to recognize it, so we can capitalize on it

Preparation

“Luck is what happens when preparation meets opportunity”

This quote from Seneca encapsulates Daniel’s philosophy on luck, but let’s get into the details.

Assets

The first step of preparation is to take stock of our assets.

This isn’t referring to financial assets, but includes intangible assets too:

Skills, interests, knowledge, and experience are all assets, and Daniel suggests thinking about these in an atomized way.

Don’t think of yourself as just one simple label. There’s more to you than just “programmer”, you also have skills, knowledge, and interests outside of programming.

Think HARD about all the individual small things you can do, things you know something about.

And don’t stop there.

Your list of contacts, people you know - that’s an asset. The savings in your bank account. Your reputation. Maybe even your location.

Broadening your perception of your assets makes you more ready to realize when you’ve bumped into an opportunity that aligns with your capabilities.

Otherwise, you get tunnel vision, and think “If this isn’t about programming, it’s not for me.”

Asset Stacks

The next level is to think about how you can combine your assets.

Daniel got this idea from Scott Adams, who talks about how having a “talent stack” lets you be in the top percentile of a combination of things, which is much easier than being in the top percentile of just one thing.

But Daniel prefers to refer to is as an “asset stack”, since the word “talent” implies something you were born with, and assets are clearly things that can be obtained.

Action steps

So, we have some homework: Step 1: Think of your assets Step 2: See how you can combine your assets

Shoring up weaknesses

When Daniel quit his job and started his entrepreneurial efforts, he recognized that he was missing marketing and reputation in his asset stack, and that acquiring them would be a major advantage.

So he immersed himself in marketing for a couple months by reading books, researching online, and running small experiments. He gradually developed a sense for it, and it became one of his assets.

In order to build a reputation for himself, he went on reddit,quora and other places where people were asking questions about things he had some expertise on. This gradually built up his reputation - another asset in the stack.

Following that example, you should examine your asset stack for serious gaps, then acquire the missing assets with small-bet style experiments.

And this shouldn’t be a one-time. He suggests reevaluating your asset stack continuously, like a background job.

Inspiration Generator

While asset stacks are important, and you can get ideas by just taking a long walk and thinking about it, there will be opportunities in your blind spot that you’d never think of on your own.

That’s why you need a catalyst from the outside world: the inspiration generator.

Businesses that succeed in the stochastic world, such as book publishers and VC’s, have a constant stream of random opportunities coming to them.

They use their selection criteria to sift through that mass of random opportunities, picking a select few to bet on. That’s a big part of how they make so many small bets and tame randomness.

As an individual, we don’t have the resources to do it exactly like they do.

But we can expose ourselves on a daily basis to random ideas that might inspire something we hadn’t even considered.

For example, Daniel checks Twitter every day; that’s his inspiration generator. It doesn’t usually lead to anything. 350 days/year it just feels like a waste of time. But 5 days/year it changes the trajectory of his professional career.

Social media isn’t the only inspiration generator. Other examples are expiring domains, startup podcasts, and sites where people sell their businesses.

Find what works for you, as long as it exposes you to ideas that make you pause and consider something you hadn’t thought of before.

Credibility & Attention

Once you are getting good ideas from your inspiration generator, you still need credibility and attention in order to capitalize on them.

A business without credibility and attention will fail, no matter how good the rest of it is.

Attention

There are many different ways to get attention. Typical ones are SEO, paid ads, building a social media following, or working with influencers.

For people who don’t have much time to invest in marketing, it can be helpful to use a market or platform where people are already looking, such as Udemy for courses or Amazon for books.

The platforms take a cut of sales, but they bring you attention.

Website referrals, where you ask a website with traffic to link to you, are an old-school way of getting attention, but they can still work.

Sharing in public forums like Reddit is successful for many people, but can be tricky depending on the community and its treatment of self-promoters.

Sharing in a private community (like the Small Bets discord) will get you a smaller audience, but the attention can be higher quality.

Another strategy is to release something for free at first. When it’s free it’s easier to share, so hopefully it gets lots of attention and testimonials. Then at some point you add a price tag for new users. The positive buzz and social proof continue to bring attention and credibility to the paid version.

Credibility

You can get all the attention in the world, but you still need credibility to convince people to give you their money.

Let’s talk about some of the ways to make yourself look credible.

We already mentioned testimonials, which are great.

In the same vein of social proof, we have the “used by” logo list of big companies, and case studies of customers who’ve had success with your product.

Having skin in the game makes you more credible. It’s one of the reasons we trust our airplane pilot to do his best. In internet businesses, that means exposing yourself a little bit. An example is using your real face and real name, which comforts people that you’re not trying to run a fly-by-night operation.

Traditional credentials like being a doctor, lawyer, etc. Not that I have any of those ;)

A good domain is automatic credibility. Would you rather buy from mountainbikes.com or joesmountainbikeshop.net/index.php

Studying your own behavior

Daniel suggests making a habit of noticing when you pay attention to something or trust the credibility of it. Reflect on why you did that, figure out what aspects of this thing won you over, and maybe replicate that in your own efforts.

Luck Blindness

Daniel closed with a list of things that can give you luck blindness, preventing you from recognizing or acting on your own luck:

I might send a newsletter sometime.