Business Blog: Luck of the draw

Tim Vieyra, Business Development Actuary, Cobalt Solutions for Businenss Owners Tim Vieyra, Business Development Actuary, Cobalt Solutions for Businenss Owners
Human's have little understanding of the random events that influence every aspect of their life. So says Nassim Nicholas Taleb in his book Fooled by Randomness. In it, he describes how we attribute much of our success - or lack thereof - solely to our own efforts, ability and choices, when in fact random events are at play. Good abilities and choices will give us a certain amount of success, but these do not explain fully why we are where we are.

Nowhere is this more true than in the world of the entrepreneur. Entrepreneurs are responsible for the biggest of success stories yet also for the most spectacular of failures. Two with equal knowledge, ability, will and perseverance will start two similar businesses next to each other. Within a few years one will boom while the other files for bankruptcy - all because of unpredictable factors that were out of their control. The successful entrepreneur will be hailed as a hero. Movies will be made, business schools will study his techniques, magazines will write articles about how he succeeded - when in fact he was just the lucky one. The real lessons lie as much in the failures as in the successes.

These concepts yield some pertinent lessons.

First, for the budding entrepreneurs. Interestingly enough, the national lottery provides some wisdom in this regard: You've got to be in it to win it. Perhaps this is why perseverance is such a hallowed virtue - the more you play, the greater the chance of success. I heard somewhere that an entrepreneur needs to fail seven times before he succeeds - on average. Make every effort to learn as much as possible from your attempts - and don't be afraid of cutting losses when things don't go as planned - but ultimately perseverance will maximize your chances of success.

For more established businesses there is an even more important lesson. The key is: success in a particular year may be in part due to brilliance, but does not mean it will repeat in the next year. A lot of success can be attributed to external factors - the same factors that could take the business out in the following year. The good book says that Pride comes before a fall, and how true this is of entrepreneurs that think their business is immune to future challenges. It is those who use success as an opportunity to build for the future and recognise that lean years may lie ahead who build the most sustainable businesses. Who could have predicted the global recession that hit in the last two years?

Practical aspects of this would include ensuring that overheads are kept as lean as possible, up to date cash-flow projections of the business is not neglected, spare cash is not squandered but invested wisely in diversifying and growing the business, new products and markets are continually developed and tabs are kept on competitors and the wider business environment.

As Yogi Bera so eloquently said, It ain't over 'till its over.

Just a thought.

Tim Vieyra, Business Development Actuary, Sanlam Cobalt