Shaan Puri on luck and risk as an entrepreneur

How To Be Lucky As An Entrepreneur | My First Million with Shaan Puri #380

Check out My First Million’s Episode Page & Show Notes 

Key Takeaways

  • Most people think that luck and risk are outside of their control, but that may not be entirely true 
  • The four types of luck: blind luck, fortune favors the bold, chance favors the prepared mind and the luck that finds you 
  • The four types of risk: mediocrity, safety, eyes-wide-shut, and market-execution-technical risk 
  • Mediocrity is the biggest risk for someone that wants to be great 
  • Instead of only thinking about putting your personal self at risk, think about whether or not you’re putting your dream at risk
  • Objectively evaluate if your current trajectory is leading you to where you ultimately want to be
  • People often think starting a company is risky, but the worst thing that can happen is it fails and you learn things along the way

Intro

  • Shaan Puri (@shaanvp) is an entrepreneur and investor. He shares business ideas and writes about his curiosities on his website ShaanPuri.com
  • In this solo episode, Shaan explains the four different types of luck, how to put yourself in a position to be lucky, and how to mitigate the four different types of risk
  • Check out these Podcast Notes from Shaan and Sam’s conversation with MrBeast

Background

  • “Luck and risk are two of the most important words for anyone that wants to be great.” – Shaan Puri  
  • Most people think that luck and risk are outside of their control, but that may not be entirely true 
  • Eskimos have 40 different words for “snow”;  it may be useful for entrepreneurs to refer to luck and risk with more nuance to differentiate between the different types of luck and flavors of risk
  • In this episode, Shaan breaks down the four flavors of luck and the four flavors of risk

The Four Levels of Luck 

  • 1. Blind Luck
    • Blind luck is out of your control because it’s either going to happen or its not
    • Examples: sitting around and getting struck by lightning, born into the right country, winning a raffle   
  • 2. Fortune Favors the Bold
    • Increase the odds of something happening by adding motion or action to the mix
    • Example: running around in a lightning storm and getting struck by lightning
  • 3. Chance Favors the Prepared Mind 
    • Years of preparation enabled you to notice something that other people may not have noticed
    • Examples: the discovery of penicillin, a seasoned investor identifies an opportunity that less prepared investors do not     
  • 4. Luck That Finds You
    • This is reputational luck
    • Naval’s tale about reputational luck: say everyone knows that you’re the best deep-sea scuba diver in the world, and the location of a sunken treasure is discovered that no one but you can get to. Others will come to you to retrieve the treasure because they know you’re the person for the job. 
    • Shaan’s goal for the My First Million podcast is not for him to be well-known, but for him to be known well 

Example of Luck in Practice

  • Kevin Rose had the prepared mind to know that Twitter would become a big deal 
  • He then took action and increased the odds of something good happening by reaching out to Evan Williams to invest 
  • Evan told him the round was closed, and that he would not be able to invest at that time
  • This is where level four reputational luck happened for Kevin: Evan reached back out to Kevin weeks later and allowed him to buy shares from an engineer that was leaving the company  
    • The $25,000 worth of shares are now worth more than $100M 

The Four Types of Risk

  • 1. Mediocrity: the risk of having something that is just okay 
    • Not bad enough to be considered a failure, but not good enough to be amazing
    • Mediocrity wastes your most valuable asset – your time – on something that is not great 
    • Mediocrity is the biggest risk for someone that wants to be great 
  • 2. Safety: there is risk in not taking enough risk 
    • Objectively evaluate if your current trajectory is leading you to where you ultimately want to be 
    • If not, then safety is putting your dream at risk 
    • Instead of only thinking about putting your personal self at risk, think about whether or not you’re putting your dream or goal at risk 
  • 3. Eyes Wide Shut: assuming that something is safe when in reality, it is not 
    • Example: investing in the housing market pre Global Financial Crisis because the leverage was triple-A rated by the trusted institutions
  • 4. Market, Execution, and Technical Risk
    • Market risk: do people actually want what your startup is building 
    • Execution risk: the acquirer buying a cash-flowing business for 4x earnings 
    • Technical risk: delivering on some lofty pursuit (creating a pizza-making robot) 

Final Thoughts

  • Shaan Puri believes that mediocrity is the biggest risk of all 
  • The goal is not to avoid risk but to better understand it and navigate through it 

Additional Notes

  • Most people don’t take the “obvious risk” in an effort to minimize risk when oftentimes the consensus is, obvious risk is less risky than things that do not appear risky on the surface 
    • Obvious risk: investing in crypto
    • Less obvious risk: investing in the housing market pre-Global Financial Crisis 
  • People often think starting a company is risky, but the worst thing that can happen is it fails and you learn things along the way

Other Media Mentioned

  • PM Archive
    • An archive of Marc Andreessen’s best writings from his 2007 blog 
  • The Big Short  
    • A 2015 movie based on a Michael Lewis book that follows a group of investors as they bet against the US mortgage market leading up to the 2008 GFC
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Notes By Stan Rizzo

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