There’s an old saying in business that you need to speculate to accumulate. While it may be slightly cliched, it does have some basis in fact. When you look at how self-made men became billionaires, you’ll see there’s a recurring theme. Despite living fairly comfortable lives, Amazon founder Jeff Bezos and Microsoft’s Bill Gates essentially gambled it all to launch their own products. While many would have been too afraid to take a “risk”, the reality is that the two men had assessed all the variables and deemed it a calculated risk. That, in practice, is what the phrase “speculate to accumulate” really means.
As an aspiring billionaire, you can do the same. Naturally, nothing in business or life is ever guaranteed. However, if you know how to take a chance, there are ways to swing the pendulum of fate in your favour. One industry that has a lot to teach you when it comes to risk in business is gaming.
Risk Doesn’t Have to be a Gamble
Over the last two decades, games have become an integral part of our culture. After going live in 2016, Pokémon Go has been downloaded 800 million times thanks to its cutting-edge technology. By using augmented reality to offer amplified realism, the game has caught the imagination of the public and, in turn, become a mainstream hit. Beyond Niantic’s AR-powered Pokémon Go, casino games have also captured the public’s imagination and it’s here you can learn some lessons about taking risks. In fact, many of the skills used by successful gamblers are now being filtered through to the masses in the form of savings apps and tutorials. For example, inside the Barclays money management app, users can access tips on how to save as well as tools that calculate their monthly budget. This is something casino players do each time they play. Known in the industry as bankroll management, this strategy involves allocating a portion of your bankroll to a certain session.
In practice, a skilled player will sit down with no more than 5% of their entire bankroll. From this, they’ll size their bets according to the amount of money they’ve taken to the table. By doing this, casino players are reducing their “risk of ruin” while still giving themselves a chance to make a profit. To link back to our self-made billionaire examples, casino players are using bankroll management to take a calculated risk. If luck isn’t on their side, they’ll only lose a small portion of their investment. Conversely, if things go well, they have enough ammunition to increase their net worth by a not insignificant percentage.
Know How and When to Up the Ante
Another interesting example of how a casino player’s skills can be used in the business world comes via the roulette table. The Paroli technique is a betting strategy that requires a player to increase their bet after a win. In practice, a player will typically double their previous bet until they hit three consecutive wins, as outlined in the Betway Casino guide to roulette strategy. This method works on the assumption that the extra money you’re risking is cost-neutral because you didn’t have it before. In other words, you’re risking your profit rather than your original bankroll. Therefore, you can afford to be more liberal with the moves you make.
For those looking to make money, this may sound counterintuitive. Indeed, when you’re starting a business, you’ll be looking to cut costs by saving money on things such as drop shipping. However, at times of plenty, roulette players will advocate a bolder approach. In common parlance, this would be called “riding a rush”. To support this idea of taking casino strategies into the business world, you only have to look at Dr Edward O. Thorp. A mathematician, Thorp became an authority on blackjack when he published Beat the Dealer in 1962. Using his knowledge of numbers, Thorp found a way to exploit certain weaknesses in the game of blackjack.
800 Million Reasons to Learn from Gamblers
As well as making money in the game itself, Thorp was able to apply these techniques to the stock market and amass a fortune of $800 million. Therein lies the final lesson you can learn from the gambling world. Only by studying the variables and looking for any weak links can you hope to get an edge. Even if you’re not a mathematician like Thorp, you can analyse the market you’re moving into a identify the areas where service is lacking or active companies are failing. Once you’ve done this, you can enter the market with confidence. Indeed, once you know how and where to direct your energy, everything becomes less of a blind risk and much more like the calculated risks Bezos et al made on their route to the top.
About Mohammad Mustafa Ahmedzai
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