Fred Wilson yesterday wrote about the analogies between startups and cards or sports, and decided he especially liked poker analogies. He watched his son try to decide whether to fold a bad poker hand, and said that venture investing often involves the same thought process.
We’ll I’ve been in that situation too, except I wasn’t the guy holding the cards, I was the cards themselves, desperately hoping not to get mucked away.
As I explained in a comment on Fred’s post, my problem with thinking of business as a card game is that, at least ideally, a game of cards is all calculation and no heart. Not so in sports. When you’re running a marathon or riding in a bicycle race, you feel despair and elation, you love the effort and you hate it, you pour your guts out and then later wonder if you really had anything more to give and it goes on and on and on and then when it finally ends you only want to be in that place again. This is how I feel about startups, too.
Which is different than how I feel about cards. The difference between sports and cards is that in cards a jack is always a jack, and an ace is always an ace. But sometimes in sports — in life –the jack digs deeper and beats the ace. If you’re the jack, you have to believe that can happen or you’ll spend your whole life in the muck pile.
Now a venture investor can’t afford to think like that. He want to detach his heart from his brain, ignore sunk costs, and bet on the aces all the time. For the VC, it’s all about picking the right team before the game even starts, and for the entrepreneur it’s all about playing to the best of your ability and then some.
So I guess what I’m saying is entrepreneurs are more like athletes — this is our weakness, that we too often play with insufficient calculation — and venture capitalists are more like poker players. It’s a good balance.
And it’s not that either one of us is purely one way or the other. For example, at our annual company meeting yesterday, Madrona’s Paul Goodrich gave an unexpectedly emotional account of how, from our earliest days, he came to believe in Redfin and what he had done to help us succeed. And for my part, Fred Wilson has helped me think more along the lines of the wonkish Peter Drucker, who once asked the brawling hockey player Jack Welch a question that Welch said changed his life: “If you weren’t already in this business, would you get into this business today?”
I ask myself that about Redfin all the time, but am never sure my answer to the question — “YES!!!!” — is emotional or rational.
The best entrepreneurs can be both ways — the cards and the card shark — calculating the odds dispassionately and then diving into the action with gusto. Did you see Malcolm Gladwell’s essay last week on the CEO of Bear Stearns, Jimmy Cayne? Cayne was a great bridge player who got his job at Bear Stearns by interviewing with a bridge aficionado, Ace Greenberg (great name). Here is Cayne’s account of that interview when the subject turned to bridge:
Greenberg says, “How well do you play?” I said, “I play well.” He said, “Like how well?” I said, “I play quite well.” He says, “You don’t understand.” I said, “Yeah, I do. I understand. Mr. Greenberg, if you study bridge the rest of your life, if you play with the best partners and you achieve your potential, you will never play bridge like I play bridge.”
But by the end of his career, Cayne had lost count of trump. He believed so blindly in Bear and his ability to run it that he couldn’t see the risks he was taking. He got a standing ovation from the folks he worked with even as investors ran for the exits. That’s not the way to go either.