Gambits: How Little Bets Turn into Big Breakthroughs in Business and Life

  
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Look closely at just about any successful enterprise and you’ll see gambits they made along the way — small bets on an unclear future that, however unlikely, would produce outsized gains if they paid off.

Gambit comes from the Italian gambetto, “tripping up.” It’s a device, action or opening remark, usually with some risk, that’s calculated to gain a future advantage. When you make an opening move, offer something, or start a conversation with something that seems self-sacrificing but is really a ploy for a later advantage — that’s a gambit.

In chess it’s when you sacrifice a pawn in your opening move to put yourself in a position for a future move.

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When a gambit doesn’t work (which is usually the case), you end up losing a pawn and moving on. When a “gambit” results in losing your queen or king — that’s not a gambit. So it’s important to be able to tell what initiatives are gambits and follow rules to ensure you don’t sink the ship in pursuit of them.

Fundamental asymmetry

In my favorite of Nassim Taleb’s books, Antifragile, he writes about “fundamental asymmetry,” which happens when risks and rewards are out of balance. He offers the example of a dinner party invitation: If you go, the worst-case scenario is that the food and company are lousy and you waste a few hours; and the best-case scenario is that you meet your future wife.

When you go to the dinner party to expand the boundaries of what you know to be possible (in this case, in your love life) — that’s a gambit.

Bullet, bullet, cannonball

In his follow-up to Good to Great, author Jim Collins advises companies to “fire bullets, then cannonballs.” Bullets are like gambits: low-cost, low-risk, low-distraction experiments to figure out what will work. According to Collins, companies gain a line of sight by taking small shots. Once they have a calibrated line of sight (empirical validation of their test), they fire the cannonball: They concentrate resources into one big bet.

Collins uses Apple as an example: There was iTunes for Mac, then the iPod, then the iTunes music store. Bullet, bullet, bullet. Then came the cannonball: the iPhone.

That’s not quite right, though. I see them all as bullets: Apple achieved an improved position with the iPod and iTunes and fired more bullets in that direction, producing the iPhone. We just happen to remember the bullets that worked — and forget about the other 50+ products Apple launched between the iPod (2001) and iPhone (2007). We forget about Xserve.

Infinite game

In The Infinite Game, Simon Sinek writes about approaching business like there are no boundaries. Whatever map you’re holding is far too limited, because things are changing and expanding in ways that you don’t understand. 

You’ve got to continually explore the boundaries of what’s possible. If you aren’t constantly looking around to see where those edges are, you’ll find yourself stuck in a very small space that you’ve imagined. Meanwhile, people around you will be operating in a different world without the artificial constraints you place on yourself.

Gambits, by definition, are unlikely to succeed. But they will improve your map of the territory and help you get oriented.

Gambit - Feedback - Iterate 

Successful companies take gambits to get a basic map of the territory. Once they have the map, then they iterate. For example, Apple produced 24 versions of the iPod; so far they’ve built 25 versions of the iPhone.

The gambit is for invention and understanding. Iteration happens once you figure out how to capture the value of the market. It requires organizational discipline. It’s tinkering, making something better within a roughly known context.

At Royalty Exchange, we don’t really know what our product or marketplace will look like in the long term, but we know much more than we did four years ago because of the gambits we’ve taken. We’ve tested ideas knowing they’ll likely fail. Even when they “fail,” we learn something. When they work, they change the trajectory of our business. I think of every one of our hires as a gambit — each time we’re not fully sure where it will go.

Growth hacking vs. gambits

Gambits and growth hacking can look alike because they are similar in some ways. But they are different.

Similarities:

  • Look for new ways to grow.

  • Put out ideas or products, get feedback, and adjust. 

Differences:

  • Growth hacking is mostly direct response marketing — it’s about optimization. 

  • Gambits are non-linear bets designed to discover what might be possible.

  • Growth hacking answers: How do we sell this?

  • A gambit invents the future.

Explore — but don’t overreach

The key is making gambits work is twofold: 

1) Gambits are exploratory. They should expand the overton window, to shed light on what’s possible. When they work, gambits provide a set of keys that might unlock that future.

2) Never overreach. Never bet the farm.

You build great companies by taking smart gambits and creating the environment for success. You’re not putting the company on the line with moonshot attempts. Rather, find the smallest step you can take to start exploring some new areas.

When calculating the cost of the undertaking, remember it’s the actual dollar cost and the time and energy it takes you. If you can move fast on a low-risk gambit, often it’s worth it. 

Create a hypothesis about the future — then test it

Create a hypothesis about the way the future might be, and then test it. Ask yourself: “What is the smallest thing I can do to test my hypothesis?”

A gambit can be a small advertising campaign to see what customers respond to, or a new hire in an area your company hasn’t explored before. Try something small and then look for a signal.

One of the best features of a gambit is that you get feedback very quickly. You put something small out and then you essentially look for any type of positive validation you can find. 

If you put out a small advertising campaign, are people talking about your company? If you made a new hire, are they changing the dynamic of your team in any noticeable way? If there’s no signal coming back, then the lack of signal is in itself negative feedback.

Either the idea was bad or the execution was bad. In either case, it’s time to readjust and make your next move.