The Venture Edge

Peter and I are big on entrepreneurs designing businesses that can withstand unpredictable events—those events that mathematician and philosopher Nassim Taleb dubbed Black Swans. This week the European Organization for Nuclear Research, better known as CERN, reported on an experiment that "...could have a potentially great impact” on science—what an understatement!

It seems like every time I turn on the news, some commentator or talking head is claiming that the U.S. economy won't get better until the government brings certainty into the financial or regulatory or tax or whatever [insert favorite excuse here] situation.

I am a huge fan of Warren Buffett's investment philosophy because I think it applies not only to investments in stocks, bonds, and other cash equivalents but to entrepreneurs as well.  Today I was reading Buffett's letter to the shareholders of his enormously successful company Berkshire Hathaway Inc.  Now, believe me, with the exception of a notable few, I don't spend my time reading annual reports because most are pretty boring.  But I always find that I learn something new when I read Buffett's annual letters to the shareholders, and they can be quite entertaining as well. 

With the business environment as unsettled as it has been lately, you might think that taking time to undertake a planning process might not be the best use of your time right now. I would actually venture that you need to plan now more than ever. One good thing about planning is that it makes you sit down with your team and take some time to think about the priorities and direction of your business. While I agree that the end result should not be a 300-page five-year strategic plan (that might indeed be overkill at this point), a short bullet list of key priorities might just do the trick.

One of the most important lessons I've learned in my years as an entrepreneur and investor is not to get greedy, not to hold out for the bigger deal, and not to negotiate a win-lose situation.  I have seen entrepreneurs turn down great offers because their egos told them that their companies could command a bigger number.  Trouble is, these days offers don't come often, so the risk of turning down a good offer in hopes of getting a great offer is huge. .

A while back Peter blogged about the importance of  focus,  specifically, focusing on what your business does well.and not getting pulled in a lot of different directions.  I agree with that, and especially if you're a rocket scientist, brain surgeon, or race car driver ,you definitely need to focus or you're in big trouble.  But if you're facing the unknown--uncertainty--the LAST thing you want to do is focus... 

Everywhere you look today the pundits are making predictions about what’s going to happen in the coming year, in the next 4years of Obama’s presidency, and even as far out as 2020. With so much uncertainty out there, how do they think they can predict anything? After all, life is not a sterile, controlled laboratory.

I have to thank Nassim Nicholas Taleb for writing one of the best business books I’ve read in a long time—The Black Swan: The Impact of the Highly Improbable. It has really changed the way I think about start-ups, success, failure, and the ubiquitous and annoying bell curve. Let me explain. Taleb’s core thesis is that the inventions, companies, and events that have the biggest impact on society, either positively or negatively, are not predictable. You can’t see them coming because there are no obvious signs announcing their arrival. In other words, you can’t plan for Black Swans (BS). You can’t, for example, come up with a business concept and an ingenious strategy to create the next Google (a Black Swan business). Even the founders of Google didn’t know when they started what impact their little search engine would have. After all, there were plenty of other search engines out there. Why did the funky, plain toast version offered by Google hit the mark? The truth is: BS technologies, inventions, and businesses—those that change the world—are rare events that hit us when we’re not looking and when we least expect them.