Place Your Bets

A recent psychological study concluded that casino gambling is an example of how being a pessimist sometimes has advantages over being an optimist. Not surprisingly, the study found that those who are highly optimistic make lousy gamblers. The logic of this is obvious. If you’re always expecting the next roll of the dice or spin of the wheel to be favorable, you’ll keep playing—and therefore losing.

After all, casino games are designed to eventually separate us from our money. In a casino, the cards are always stacked against us—deliberately so. That’s what makes a casino profitable. The long established laws of probability assure that over time the house will win more than it loses (and the gamblers will lose more than they win).

Life is arguably an exercise in placing bets, of taking risks, of choosing where to wager our time and money. This is certainly true in business where investments always involve risk. Successful innovation is also a wager. It requires experimentation, taking calculated risks. So how can casino gambling be a bad bet and innovation a good one?

Because the odds are different.

A casino is an artificially closed system, carefully designed to favor the house at the expense of the gambler by exploiting the gambler’s optimism. The longer you play the more inevitable your losses become. Casino operators and addicted gamblers go to great lengths to conceal or deny this reality but it exists nonetheless.

With innovation, the odds favor the gambler. The longer you play, the more likely you are to win. Each calculated risk that fails, if carefully evaluated and used to learn, brings us closer to a successful solution, by teaching us what won’t work and hinting at what does. It’s those who stop gambling, who fail to experiment long enough and often enough, who give up too soon, who lose.

In the real world, the deck is stacked in favor of those willing to wager—if we’re smart gamblers. Risk taking is rewarded when it’s done systematically. A well-designed approach to innovation is like counting cards in a casino. It’s a way to shift the odds in favor of the player. That’s why it’s illegal in a casino, but the game of business (and life) has no such artificial rules. So the odds really do favor the optimists, the experimenters, the risk takers—the innovators.

The key is having a good system.

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