asymmetric-bets

Asymmetric Bets To Scale Your Business

Another dimension of asymmetric betting is given by how impactful the idea can be to the business. When we have asymmetric bets that can have a high impact and are easy to reverse, we get to the “Jackpot” and go into an “All-In-Mode” of action! And how easy to reverse.

Introducing Asymmetric betting

There was a time when the motto for Facebook was “move fast and break things.” This was the foundation of the “Hacker’s mindset.”

Over the years, as Facebook scaled up, its motto also changed. And it went from “move fast and break things” to “move fast with stable infrastructure.”

In short, when a company has scaled at a certain size, it loses the ability to experiment fast because almost all the experiments it undertakes are hardly reversible.

For a company like Facebook, even a small experiment targeting a few thousand users will be under journalists’ radar, amplifying the experiment if it goes wrong.

That is why – I argue – scale, to a certain extent, reduces the ability of companies to experiment.

Yet, if you’re just building a company, and your scale is limited, I think you have a valuable opportunity. As you can undertake, I like to call “asymmetric bets.”

Asymmetric bets are experiments, which are quick to implement, while they carry a very low downside, a potentially high/or unlimited upside, and they are reversible!

These, to me, are the goldmine for business people, and I’ve been obsessed with this concept for years.

Indeed, my main argument for why small startups can undertake large players it’s that small startups have in their favor these asymmetric bets.

As we saw, the case of large, scaled-up companies (like Facebook) is very hard to take advantage of because those large companies are under the radar, and any experiment they will undertake will be overseen by millions of people. 

But how do you find these asymmetric bets?
Let’s start by defining them!

Speed vs. Reversibility

In the speed vs. reversibility matrix, I defined four main decision-making models of action. 

By looking at two main variables.

decision-making-matrix

On the one hand, assessing an experiment’s risk is simply based on the worst-case-scenario test. In short, the question there is, what happens if the experiment goes wrong?

In a scenario where you know that if the experiment goes wrong, it will have a limited downside on the business, then the risk is low.

In the opposite scenario, where the worst-case scenario test can have a large negative impact on the business, the risk is high.

On the other hand, we want to ask whether the experiment is reversible.

In short, can you go back to how things were before the experiment? If the answer is “yes,” then you have a reversible experiment. If the answer is “no,” you have a non-reversible experiment.

Now we can define where asymmetric bets sit on top of this matrix!

Asymmetric bets: the sweet spot between speed, reversibility, and potential impact.

Understanding Asymmetric Betting

Asymmetric bets live at the intersection of low-risk, highly reversible experiments with a potentially unlimited upside. 

But if these asymmetric bets are so powerful, why doesn’t everyone uses them?

1. Smart business people use asymmetric bets in combination with bolder bets to lower entrepreneurial risk. In short, asymmetric bets serve as a way to balance out other risks you might have to undertake as an entrepreneur.
2. Asymmetric bets require a specific mindset. You need to be wired to understand problems in the real-world (rather than looking for problems for your solutions). You need to understand that the world of perception can be more powerful than the engineering side. In short, things like UX can impact your bottom line as hard code changes the core functionalities of the product.
3. When you find these asymmetric bets, others might start to copy and paste them, thus making them less effective over time. In short, asymmetric bets follow the law of diminishing returns.
4. Those asymmetric bets might be highly contextual. They might work in one domain, not in another, so testing is critical. 
5. Asymmetric bets work depending on the scale of the business. Certain asymmetric bets work until a certain size of the company. They kind of stop being effective. 

With that in mind, let’s see some of these asymmetric bets in action!

Unlocking a fast-decision-making mode of action!

With that in mind, let’s see some of these asymmetric bets in action!

But before, let’s give some priorities.

Within the asymmetric betting model, we want to look for the “Jackpot” or those asymmetric bets that will unlock the “All-In-Mode!” To scout them, we’ll use two more dimensions:

1. How impactful can it be? We have either low or high-impact ideas.

2. How easy to reverse? In this case, we have ideas and experiments which are hard to reverse vs. the ones that are much easier to reverse. 

Based on that, we try to give maximum priority to the “pure asymmetric bets.” 

All-in-mode!

Other business resources: 

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