The Entrepreneurial Savant

Expert poker players know that the way to win consistently is to fold whenever you have a hand that is weak and hang in there when your hand is strong. They also know that when you have a good hand, it gets better as more cards are on the table. Extremely successful investors also know that it is vital to have a plan to cut losses quickly and to let profitable positions ride until they run out of steam. As obvious as these tactics seem, very few humans make good poker players or successful speculators because it is our nature to hold onto losing positions until we can regain our losses. We also tend to grab profits right away instead of letting them build. The key to changing this destructive behavior lies in having a plan to control your exposure to risk.
Whatever you do for a living, it is a good idea to know the point where you will stop putting energy into a losing situation. When you make your plans, build in a set of indicators that tell you that things are not working out and that it is time to exit gracefully, accepting your small losses as an investment in experience. By doing this you’ll leave yourself the energy and resources you need to go on to other things.
Conversely, when things are going well and you have begun to profit from them, you must resist the temptation to get out while the going is good. The best time to take your winnings is after the tide has turned and your project is running out of steam or changing. Getting out too early will not put you into the black. It works like this:
Imagine you get five bad hands in a poker game or five stock market picks start going down. The person without a risk control plan will lose a little too much money on each losing situation as they hope for a turnaround, adding up to considerable losses, possibly even breaking the bank. The player with an experienced attitude towards risk gets out as soon as it is apparent that things aren’t working out, taking a small loss. On the winning side, the participant without a plan who finally gets a profitable position will usually get out too early because of the desire to ‘protect’ their winnings. The experienced player knows that he must bet the pile on the winners and stay in there, taking money away from the little profit takers and making up for all those little losses he accepted earlier. One 100% gain wipes out nine 10% losses and shows a profit. One 100 % loss puts you out of business.
The secret of risk control is to have plan and stick to it, no matter what.

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A consideration is a form of payment and receiving one is the sign of a professional. If this seems like a contradiction to our secret that tells you to give things away, think of it this way: It is the nature of the consideration that is important. In business matters the consideration may be money, referrals, the promise of future business, etc. In charitable matters it may be internal satisfaction or the knowledge that your contribution will have measurable effect. Only by insisting on a consideration do you value your contribution in the eyes of others. Insisting on results may mean your money or time is put to the most beneficial use rather than being thrown into an amorphous fund.
Why is it important to be considered a professional? Self-esteem issues aside, we live in a capitalist society and the professionals often get the most interesting opportunities. The most basic description of a professional is one who pursues their interests as a profession, a source of life. If you are truly dedicated to your vision then being a professional is the least you can do. And that means requiring a consideration for your input.

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Many of us view money as the measurement of success. In part this is because we live in a materialistic society whose value judgments are often based on how much material wealth a person has gathered in their lifetime. This might contrast, for instance, with a  society like India’s where a wise teacher is revered for their knowledge and compassion rather than the number of followers they have or the size and opulence of their temples.
Because we use money as a measurement of success, it is important to understand what money is. Money is a representation of energy. When we do work for hire, our efforts are repaid in dollars which represent a specific value placed on our work. Wealth is often accumulated by leveraging our efforts, either through the use of borrowed assets, tools or money or by hiring others to do our work and then marking up their efforts to bring ourselves a profit.
The value of realizing that money is a form of energy is that we can get past the desire for money for its own sake and realize that what we desire is more energy. That energy may take many forms. A teacher dispenses energy in the form of knowledge and experience. a computer creates energy in the form of extra time saved and the speed with which it performs routine or repetitive tasks. Energy comes from relationships that provide support and love giving us new strength and motivation. All of these sources of energy, along with money, are the fruits of success. However they come with a catch. We can only use so much energy. Beyond a certain point, an excess is useless to us personally. Because of this there is a responsibility to spread your energy around after you attain success by teaching, creating jobs, empowering charitable organizations and providing motivation and support to others.
Ironically, the more energy you pass along, the more comes back to you in a variety of forms. One of the most effective ways to get started on the path towards success is to start passing the energy you have out to others without obligation or expectation of a return. It will come back to you in unexpected and exciting ways.

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I’ve tried to avoid clichés in this collection but this is one that everyone can relate to. Scams, undependable people, dreamers and crooks have all flourished because people conveniently forget this simple statement. When something sounds really great, stop a minute and think it out. Seek informed opinions. Check references. Ask to speak to long term satisfied customers. Do a little research. Then and only then, if everything still smells like roses, go ahead. If there’s any doubt, throw the bums out because if it sounds to good to be true….

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When pay or profits come in take 20% and put it away in some kind of investment account. This rule could also be called ‘Take a 20% pay cut’. If possible, put the money somewhere that isn’t real easy to get to. If you can go to an ATM machine and tap into your nest egg, it won’t last long. Even a mutual fund that takes a few days to get a check back to you will serve to make you think twice about spending that money.
By paying yourself first you make sure that you actually are making a profit in whatever you do, even if you spend all the rest of your income. We tend to raise the level of our spending to match our income. This technique ensures that you have something put away for a rainy day (or a sunny one in the Caribbean).

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How much is your time worth? If you normally make $15 an hour for your time then try using that figure in non-work periods of your life. For instance, if you need to get home from the airport and you have a choice of a ten minute cab ride at $10 or a 45 minute bus ride @ $1, it may not be cheaper to ride the bus. Your time is worth around .25 per minute. The bus ride costs you $12.25 when you figure in your time (.25 x 45 + $1.00). The cab ride costs you $10 + $2.50 (ten minutes) but saves you 35 minutes or $8.75. The cab option is $8.50 cheaper when you consider the value of your time.
This exercise is simplistic and leaves out the possibility that you can accomplish other things while riding the bus but it does serve another purpose. Very often we fail to consider the value of our time when we make decisions. It’s penny-wise and pound foolish. Use your valuable time to accomplish those tasks that you are skilled at and use others for their skills. A seventy-five dollar an hour plumber may seem expensive until you spend twelve hours trying to fix something they can take care of in a few minutes.

Knowing the actual value of your time can really change your perspective about outsourcing things you are not skilled at.

If you make $100,000/year, your time is worth .80/minute. Imagine you waste ten minutes arguing over something trivial. Was it worth $8?

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It’s simple: If someone owes you money they will no longer be a source of business until that debt is paid. Rather than working things out with you and salvaging your relationship, they’ll disappear until the debt is paid.
It’s embarrassing to owe money even when the cause is beyond a person’s control. Open a dialogue, even if you have to initiate it and find a way to keep things flowing. You might end up helping out a valuable future customer. On the other hand, the true deadbeat will show their true colors when you offer to work it out by disappearing or never showing up. Write them off now.

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