31
A Momentary Lapse of Reason
WE RECEIVE SO MUCH information in our lives that our memories are sometimes too short. This is probably why throughout history, the same failures always repeat themselves in different eras; pain is temporary, and when it wears off, it is easy to forget.
Just when this book was starting to make sense to you, when you were finally realizing all of the hard work, the trade-offs, the risks, and the issues that were involved in starting a business, something happened. You turned on The Oprah Winfrey Show and caught a segment on business successes. You saw Oprah interview a single mom who had no money, no experience, and six young kids and created a multimillion-dollar business selling scented hand puppets out of her basement.
Wait, you’re thinking. If she can do it . . .
There are a few thoughts I want to reiterate. My first thought is, sure, it is possible. However, possible and probable are not the same thing. There are people who win the Powerball multi-state lottery from time to time and take home more than $100 million dollars. The chances of that are really slim, and it sure isn’t a good investment strategy to put all of your money into the Powerball lottery, but it is possible to win big, and some lucky one-in-a-few-dozen-million bastard will do it.
My second thought would be that maybe you didn’t get the full story. I know a gentleman who recently sold his business for $20 million. Are you impressed? You shouldn’t be, because he and his partners invested $35 million to get the business to the point that it was worth $20 million. Overall, they lost $15 million in that business, even though part of the story included a sale of the business at a $20 million value. But I didn’t tell you that part of the story, so you just assumed that the $20 million number was impressive. You can’t determine if a business is successful just because it is called profitable, has a certain level of sales, or was sold for a certain amount of money. You need the gritty details.
The Rest of the Story
Remember, you don’t always get the full story, like the widely held beliefs about Bill Gates’s start. Maybe the lady on Oprah was a single mom without a dime but happened to have a rich uncle that financed the business. Maybe she had to raise so much capital that that by the time her creditors or equity partners were paid out, not much was left for her. Maybe she had a friend or mentor that had the exact experience, contacts, or relationships that she was lacking, and she used them heavily. Or maybe she was just that several-dozen-million-to-one lottery winner.
If you find your mind wandering, your memory getting short, and yourself enduring a momentary lapse of reason, go back to the Let’s Make A Deal curtains and your personal Entrepreneur Equation. How much would you be willing to risk for the potential reward at the end of the day? Certainly you wouldn’t spend hundreds of thousands of dollars of your savings on Powerball lottery tickets (if you would, you should put down this book immediately and go directly to Gamblers Anonymous).
Just because something can happen, doesn’t mean it is likely to or that the odds make sense or that the risk justifies the reward. You could marry a supermodel or become a ruler of an island nation, but you probably wouldn’t want to bet your savings and your salary on it. Keep that in mind the next time Oprah, Forbes, or Yahoo! News profiles some rags-to-riches business story. Also, keep in mind that the devil is in the details. They may not be telling you the whole story and just because you hear some statistics, that doesn’t imply anything about the overall success of the business or the financial rewards of its owners. Chrysler was a multibillion-dollar business. If you heard about a multibillion-dollar company, you would think it was successful. In 2009, that company went bankrupt. One data point doesn’t always relate to the others.