#4a2: Small bets vs big bets, in practice.

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Compare the approaches of making many small bets and making few big bets. In a simple, non-interacting model (unlike our complex world) with infinite time and resources (which you no doubt lack), the expected results of both approaches are the same. The real world is not such a model.

The low risk of small, reversible changes provides low reward, but can be repeated often.

The high risk of large, costly, irreversible changes provides the opportunity of high rewards, but each bet can be made less often.

In practice, however, the outcomes of these approaches diverge. Without the benefit of infinite time and resources, the high variance of the big bets approach can be dangerous in the short-term. The world reacts to each outcome — and your team, company, and investors may not be willing to bear large short-term failures.

(Conversely, big bets may be necessary when you need to make an outsized impact in a short time, where circumstances don't allow you to accumulate small wins over a long time).

And just as the world reacts to each bet, so do you. With each bet you receive feedback, and by learning from this feedback you can make your bets smaller (lower risk) or make their opportunity for impact greater (higher reward).

This is where many small bets have the advantage over few big bets — more bets means more opportunities to learn.


Related: 4a

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