Published in UT San Diego, October 14, 2013
“ ‘Do I feel lucky?’ Well, do ya, punk?” is one of the iconic lines from American cinema. The movie is “Dirty Harry,” and the actor is Clint Eastwood. How does luck and chance fit into the life of the entrepreneur? How do you know when opportunity has shown up and you need to take advantage of it now?
I just finished reading Billy Crystal’s new book, “Still Fooling ’Em,” and there is a moment that happens by chance early in Billy’s life. Jack Rollins, the most famous manager of comedians, happens to see his act at the comedy club Catch a Rising Star. Rollins criticizes the act and offers some strong suggestions. Billy listens and makes the adjustments. Rollins takes him on and, as they say, the rest is history.
I recently watched an episode of “Shark Tank” in which the contestant is pitching some kind of goofy idea. Mark Cuban shows some interest while the other sharks have all passed. The contestant wants $300,000, for which he is offering 10 percent of the company. Clearly, this is an insane valuation. Cuban counters with “I am interested. What will you give me for $350,000?” The contestant mumbles and fumbles and finally tells Cuban that his professor/partner thinks the valuation is fair. Then he begrudgingly offers to increase the deal to 15 percent. Cuban promptly passes. Game over.
The contestant walks out, turns to the camera and says, “Wow, I can’t believe I just turned down Mark Cuban.” Neither could I. If you can get Mark Cuban to give you both time and money, you take it. The valuation is meaningless. The right answer would have been, “Mr. Cuban, what percent ownership would you like?”
I believe chance and luck are not random. They do show up in your life. They are like a sine wave. They come and go; they have a rhythm. My favorite author, Daniel Kahneman, says they are like a train that periodically comes through the station. If you happen to be standing on the platform, get on the train.
In my own life, there are countless stories of chance and luck playing enormous roles. I found the money for a downtown high-rise condominium by standing in the pasta salad line. (Full story in my book).
The assignment for the entrepreneur is to recognize it when it shows up and to seize it. But how do you differentiate the Mark Cubans from the Joe Schmos? And how do you maximize the opportunity to be standing on the platform when the “luck train” roars by?
Unfortunately, the maxim “It’s not what you know, but who you know that matters,” is still true.
A young entrepreneur came to see me, and I referred her to my partner, who has the most connected Rolodex this side of Mark Andreessen. They met and unfortunately were not able to make a deal. The entrepreneur was being asked to give up a piece of her company, but it was structured as pay-for-performance — no money raised, no ownership created.
This model is somewhat different from the typical “adviser” who gets a couple points for giving advice and maybe helping out. It is always awkward to carve those points back, even when you find the adviser to be a semi-charlatan and not particularly effective. This deal should have been a no-brainer. The entrepreneur had a medical device company, and my partner knows members of the board of Johnson & Johnson.
In fairness, the entrepreneur needs to road test the adviser before committing to a relationship, and the adviser should get nothing without demonstrated performance.
Still, the hard part for the entrepreneur is how to find the Rolodex — the real value add — the Mark Cuban, the Jack Rollins effect — the person or team that can provide the rocket fuel for launch. And to maximize the chance for chance to arrive, you need to hang around the train station and be very flexible, open to negotiation and renegotiation, talk to everyone, including the porter and the baggage handler (you never know), be humble, but also opportunistic — and then when the Super Chief comes roaring through — jump on.
Rule No. 324: All aboard.