Avoiding big mistakes
In poker, there are two kinds of mistakes: small mistakes where you add an extra bet to a pot you lose or miss a bet on a pot you won, and big mistakes, where by your action (or inaction) you don’t win a pot that you otherwise would have won. If you’re going to make a mistake in poker, make a small mistake that loses you a bet, not a big one that loses you a pot.
In blackjack, you can precisely measure the cost of any mistake. Of course the outcome will either be winning or losing a pot (along with in some case doubling the size of the pot), but what you should measure is the statistical outcome. On average, how much should you expect to win or lose by making the decision. One common blackjack mistake (assuming that you aren’t counting cards and thus don’t have additional information to make the decision) is taking insurance. How bad a mistake is it? Almost 8%.
Some common blackjack mistakes are horribly costly: for example, splitting 10’s, even against a 6, costs you 53% of your bet. Others not so much: doubling an 11 against a dealer’s ace loses you about 2%.
In blackjack, you can eke out an edge of about 1% by counting cards and varying your bet. Some systems theoretically allow for an edge of 1.5-2% with wide bet variation, but that’s likely to get you either thrown out of the casino (happily never happened to me) or shuffled on every hand (yes, this has happened to me a few times). If you’re playing close to 100 hands an hour heads up, you can afford to make a reasonable number of 2% mistakes, but not very many 53% mistakes.
In business, things are much less definite. How costly is an opportunity not pursued? I remember one phone call on a Friday afternoon where the customer wanted to meet the next morning — in Washington DC, and I was in California. Was it really worth the disruption to fly? In that case I did, and we wound up closing a deal for over $10 million, which was nearly the entire revenue of the company inception-to-date. Missing that one would have been a big mistake, but how do you know in advance?
The biggest mistake in business is running out of money. That one is definitely worth avoiding. Beyond that, I try to err on the side of making decisions that will give me data on whether they were good or not rather than decisions that may fail silently. I try to err on the side of exploring things empirically rather than pruning too early. At the same time, there’s a need to focus and not try so many things that none of them has a chance to work. That’s where things are as much art as science. If anyone has advice on how to avoid big business mistakes, I’d love to hear it.