Rich vs. King in the Real World: Why I sold my company
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Rich vs. King in the Real World: Why I sold my company
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Re: Rich vs. King in the Real World: Why I sold my company
#2A good friend of mine (actually back then, my boss) decided to roll the dice in that situation instead of just cashing in 15mill. He lost that game, and he only told me a long time later that he was offered that choice.
I think this is one reason why VCs want young entrepeneurs, because VCs need people who think that they get many more opportunities to cross that line in case the current startup tanks. Because VCs will ALWAYS pick box B if the expected value of B is larger than that of A, even if A is a 100% thing.
Re: Rich vs. King in the Real World: Why I sold my company
#3A good friend of mine (actually back then, my boss) decided to roll the dice in that situation instead of just cashing in 15mill. He lost that game, and he only told me a long time later that he was offered that choice. I think this is one reason why VCs want young entrepeneurs, because VCs need people who think that they get many more opportunities to cross that line in case the current startup tanks. Because VCs wi…
My Dad did exactly the same thing. He ran a steel company with profits of around £600,000 was offered ~£2 mill for the company and turned it down. The recession of the 1990's came and completely wiped out the steel/construction industry and his company went under.
In the highly unlikely event I'm ever given that opportunity I'll definitely pick Box A, I've seen first hand just how hard it can be when Box B doesn't work out.
Re: Rich vs. King in the Real World: Why I sold my company
#4The key is that your selling point has to pass that line. If you're 75% there, how many people would take it?
Re: Rich vs. King in the Real World: Why I sold my company
#5we watch game of thrones and we want to give everyone a sword
Re: Rich vs. King in the Real World: Why I sold my company
#6A good friend of mine (actually back then, my boss) decided to roll the dice in that situation instead of just cashing in 15mill. He lost that game, and he only told me a long time later that he was offered that choice. I think this is one reason why VCs want young entrepeneurs, because VCs need people who think that they get many more opportunities to cross that line in case the current startup tanks. Because VCs wi…
It's actually an interesting toy problem. Brings me back to microeconomics. Most people tend to be risk-averse, so they will never accept a 50/50 gamble (ref: http://en.wikipedia.org/wiki/Von_Neumann%E2%80%93Morgenstern...). However, those in the startup space tend to be risk seeking, thus they are more inclined for the second option. Behaviorialists will point out this is a classic example of framing effect (http://en.wikipedia.org/wiki/Framing_effect_(psychology)). While the distinction between 10 or 20 dollars is trivial, the distinction between 5,000,000 and a gamble of 20,000,000 is more substantial.
Re: Rich vs. King in the Real World: Why I sold my company
#7The key is that your selling point has to pass that line. If you're 75% there, how many people would take it?
75% of the way to never having to work again? A whole lot of people would take that deal, and they'd be smart to do it.
Here's the thing about accumulating money - the more you have, the easier it is. Going from zero to 25% of 'never having to work again' has got to be an order of magnitude harder than going from 75% to 100%.
By the time you get to 75% of your personal 'never have to work again' figure, you'll have access to a better class of financial advisors and more investment opportunities. Your bank will start to kiss your ass. At even a modest rate of return, you'll be making large sums each year with zero effort on your part. You can be much more choosy about the opportunities for paid employment you decide to accept - it's a lot easier to optimize for your own pleasure instead of raw salary.
In short, it's a very nice place to be.
Re: Rich vs. King in the Real World: Why I sold my company
#8It might be a small niggle, but the author is pretty dismissive of microeconomic theories of risk.
Despite what the author writes - "Of course statistically there’s no difference, so this isn’t a question of math or economics or intelligence; it’s a measure of your attitude towards risk.", risk aversion is a well studied concept in economics.
http://en.wikipedia.org/wiki/Risk_aversion
Most people have a preference curve that is risk averse, and for these actors it makes perfect economic sense to take the 10 and not the 20. 'Statistically identical' they most definitely aren't, just the expected value.
Re: Rich vs. King in the Real World: Why I sold my company
#9I'd take Rich. I hate that I would, but I would.
I'd make that call not so I can quit working full-time. I'm only 29. I'd take it so I can start working full-time. So I can guarantee that I focus on real work for the rest of my active life. Liberate the cognitive 1% from subordination, and creation (real work) happens. (Humility is not a virtue in people like me. If we don't raise up our confidence to overwhelm Authority's much more toxic arrogance, with the intent of the latter's decisive and irreversible demolition, the world loses.) It'd be selfish for me not to take Rich, with that option. Then I could go off and be as King as I want.
That said, I think this selfish mentality (Rich > King) is, on the whole, really bad for startups. Rational people will close out lifestyle businesses (and walk away, wealthy) because they aren't likely to get another one if a competitor takes theirs down. That's a shame. The build-to-flip mentality has created a VC-istan ecosystem no longer worth caring about.
In VC-istan, we have an array of dumb ideas and shitty cultures, and no one cares for shit about the future. We have a lot of well-connected VC-funded Founders who are just glorified PMs with the mentalities of dinosaur executives that "startups" were supposed to kill off.
We need to bring back the lifestyle business and make it a viable lifestyle and career (even if individual business shall fail, which is inevitable). A Fleet of 50,000+ small companies doing interesting things and working toward Real Technology. We won't get there as things are now. There needs to be a reliable path for technical minds to find safety and capital. Given that there's no real source of capital for small, lifestyle businesses-- at least, not yet-- it doesn't exist yet. But the world fucking needs it.
Re: Rich vs. King in the Real World: Why I sold my company
#10A good friend of mine (actually back then, my boss) decided to roll the dice in that situation instead of just cashing in 15mill. He lost that game, and he only told me a long time later that he was offered that choice. I think this is one reason why VCs want young entrepeneurs, because VCs need people who think that they get many more opportunities to cross that line in case the current startup tanks. Because VCs wi…
This is an excellent point and could also highlight why Europe is relatively slagging behind when it comes to high value startups. Europeans are often much older than in the US when founding a company (mid 30s). This could explain an increased risk-aversity.
A while back I was attending a talk by Thiel, and his point was that Europeans should stop exiting $10m companies when they could have build those up to a $1b valuation. He framed this quite interestingly, somewhat as a duty to society, as only with this kind of capital it is possible to built a futile start-up environment for following entrepreneurs.