While I don’t think it was necessarily Mark Cuban’s intent, in a post over on Blog Maverick he implicitly describes entrepreneurship in a way that would be highly familiar to students of the “lottery effect”:
In basketball you have to shoot 50pct. If you make an extra 10 shots per hundred, you are an All Star. In baseball you have to get a hit 30 pct of the time. If you get an extra 10 hits per hundred at bats, you are on the cover of every magazine, lead off every SportsCenter and make the Hall of Fame.
In Business, the odds are a little different. You dont have to break the Mendoza line (hitting .200). In fact, it doesnt many how many times you strike out. In business, to be a success, you only have to be right once.
One single solitary time and you are set for life. Thats the beauty of the business world.
If it’s fair to think of entrepreneurship in lottery effect terms — recall, in a lottery effect people are willing to “pay” much more than the expected value because the potential payoff is so high — does that mean that most entrepreneurs overpay?
For sure, and while that can and does take monetary terms, with people taking themselves deep into bankruptcy risk, money isn’t the only thing people use to buy lottery tickets on entrepreneurship. People also bet marriages, hair follicles, and time, all of which cannot be (easily) replaced, but all of which amount to payments, of idionsyncratic sorts, on the entrepreneurial lottery.