Annoying people in various scenarios, asymmetrical bets and avoiding the well.
By: Benjamin Hopkins
Tags: Mental Models, Risk, Thinking, Startup, Entrepreneurship

In my limited 23 years experience on this floating rock, I have come to be pretty sure that asymmetrical bets are a fantastic rarity. My first encounter with asymmetrical bets came from a man called Mohnish Pabrai. Mohnish is a very successful fund manager who is one of the wisest people I have come across (he has no idea who I am). In his book, “The Dhandho Investor”, he explains what the heck the word Dhandho means to him, (the Gujarati translation is slightly different). Here was his definition:

“Heads I win big, Tails I don't lose much”.

This to me sums up an asymmetrical bet. Where your upside is fantastic and your downside is very limited. I use this lens to seek asymmetrical bets. Here’s a scenario of what is not Dhandho.

I run a business called BioOnics, it’s great, you should check it out. My time is spent making decisions all day that can lead the company towards our goals or throw the electrically charged business into a well, I try to avoid the latter.

Scenario — Get a large business loan. Heads I get the loan and all goes well, tails the bank uses the business as collateral and I lose the business. This puts me into the well. This is not Dhandho, this is heads I win big, tails I lose just as much.

Dhandho helps to stay rational when it comes to risk as it forces you to appreciate the downside. The best definition of risk I have come across is the following.

“Many things can happen but only one will”

Dhandho helps mitigate against the things you don't want to happen. Wisdom is prevention kind of thing, you cant get thrown into the well if you go nowhere near it. Now onto applying a Dhandho lens.

Start a business- Heads it goes well, Tails you learn loads and most probably will have fun doing it. Start a podcast- Heads you’re the next Joe Rogan, Tails no one really takes to it, a few naysayers make a few comments and never listen again. Work at a startup- Heads you learn loads and it goes well, Tails you have a unique experience which separates you from mean. Start many books, finish few- Starting many books you can filter the fluff from the solid. Heads I find a life-changing book, tails I am in the library a bit too long and can’t find something that I really want to read. Meet with many investors. I met with roughly 30–40 investors. Most said no. Few said yes. The only downside is the opportunity cost on the time spent approaching a large number of people. Invest in good business trading below liquidation value. Price=£10.00 liquidation value =£15. Heads the business goes well and exceeds the current £10 price, tails they liquidate and you make a profit. Cold calling, Heads it goes somewhere, tails you annoy them and they hang up. Start writing on Medium. Heads it helps me in some way shape or form, even if it is just helping to clear my thoughts, tails I waste an hour rambling on about something no one is vaguely interested in reading, and might just annoy a few people.

The odds are in your favour with these kinds of bets. If you’re not willing to accept the downside you invite no chance of capturing the upside. Here’s the lead singer of U2 Bono on the subject:

‘You know, I know 10 percent of people are going to screw me. That’s OK. If I’m not willing to be vulnerable and expose myself to that 10%, I’m going to miss the other 90%.

Why do so many talented people not go for that 90%? Daniel Kahneman won the Nobel prize for answering that question. Sadly there’s a huge asymmetry between the human desire for gain and the human desire to avoid loss.

Use a Dhandho lens to find these valuable opportunities where the odds are in your favour, assess the risk, then have the nerve to go for it. This is something that has helped me along my way. It might help you, it might not. Just avoid the bloody well.