One of our consultants in SOOMLA is a Philosophy Phd. and he recently pointed me to an interesting argument made by Pascal, the 17th century philosopher and mathematician.
Pascal’s wager – should you believe in god?
The argument known as Pascal’s wager is about whether or not one should believe in god. Pascal is proving that a rational person should believe in god by considering the 4 different scenarios:
- Choose not to believe and god does exist
- Choose not to believe and god doesn’t exist
- Choose to believe and god does exist
- Choose to believe and god doesn’t exist
Pascal argues that the difference between believing and not believing in a situation where God exists is infinite where the difference between the two strategies where God doesn’t exist is finite. Therefore, the strategy of believing is superior to that of not believing.
Startup advisors and the value you can receive
Cool philosophy lesson but how is that related to startups? Well, the context this came up in was that we had an opportunity to get a new advisor on board and we were trying to decide if it’s worth the price. One of my investors pointed out that if your advisor has the potential to impact your business in a very big way you should take him or her. The example he gave is that a good advisor could introduce you to a potential buyer for the company or he can give you an insight that will save you from doing a big mistake since he or she sees the market from a different angle.
There are 4 scenarios here:
- Choose not to bring him and he would have made a huge impact
- Choose not to bring him and he wouldn’t have made a huge impact
- Choose to bring him and he would have made a huge impact
- Choose to bring him and he wouldn’t have made a huge impact
As you can see, the strategies and outcomes here are very similar. The difference between having a huge benefit to not having it is, well, huge. At the same time, the difference between bringing and not bringing is very small in terms of the immediate price you pay assuming this is a stock options based engagement.
The only question you should ask about potential startup advisors
Consequently, there is really one question you should ask yourself about a potential advisor: “does this person have a potential to make a huge impact on my business?”. If the answer is yes, even with a small probability, the decision becomes very simple. The cost is nothing so even with a small potential of a huge outcome, Pascal’s wager shows that the rational decision is to hire him or her. Usually, advisors that have the potential to make a huge impact compared to the advice you get for free are actively managing companies in your ecosystem. These are the guys you want.