What are Little Bets?

by peter

Click here for an excerpt from “Little Bets.”

What is a “little bet”?

Little bets are a way to explore and develop new possibilities. Specifically, a little bet is a low-risk action taken to discover, develop, and test an idea. Chris Rock develops new comedy routines by making little bets with small audiences; Amazon’s CEO Jeff Bezos makes small bets to identify opportunities in new markets like cloud computing. Little bets are at the center of an approach to get to the right idea without getting stymied by perfectionism, risk-aversion, or excessive planning.

How is this approach different from and better than the typical way most people do something new?

We’re taught from an early age to use certain procedures and rules to analyze and solve problems, such as for math or chemistry. There’s an emphasis on minimizing errors and avoiding failure. These skills serve us extremely well when we have enough information to put into a formula or plan. But what happens when we don’t even know what problems we’re trying to solve? In those kinds of situations, engaging in a process of discovery and making little bets complements more linear, procedural thinking.

What research did you do for this book and what did you set out to discover?

I wanted to find out what went on behind the scenes with some of the great achievements and innovations. Most of them weren’t the epiphanies of geniuses, but instead the result a specific type of experimentation. To find the common elements of their approach, I reviewed empirical and neuroscience research about creativity and innovation, interviewed or observed dozens of people about their approach from Army counterinsurgency strategists to agile software development teams, architect Frank Gehry and comedian Chris Rock. I also talked to entrepreneurs who had self-financed billion dollar businesses, experts in the rapidly growing field of design thinking, as well as musicians like John Legend. Last, I interviewed executives inside a range of organizations such as Amazon, Pixar, Procter & Gamble, Google, 3M, General Motors, and Hewlett Packard.

What about big bets? Why do you focus on little bets?

We all want to make big bets. That’s a Silicon Valley mantra. Be bold. Go big. But I think ingenious ideas are over-rated and that people routinely bet big on ideas that aren’t solving the right problems.  I’ve heard thousands of entrepreneurial stories, some extremely successful, but many mediocre, or not successful.  That combined with the extensive research my team and I did for this book leaves it clear to me that instantaneous ideas are extremely rare, in business, art, science, or you name it.  Just as Pixar storytellers must make thousands of little bets to develop a movie script, Hewlett Packard cofounder Bill Hewlett said HP needed to make 100 small bets on products to identify six that could be breakthroughs. So, little bets are for learning about problems and opportunities while big bets are for capitalizing upon them once they’ve been identified.

What surprised you most in what you found?

How successful people in vastly different fields had arrived at very similar approaches. Story developers at Pixar, Army General H.R. McMaster, and Frank Gehry use the same basic methods and make lots of little bets. They even use similar language and vocabulary – like “using constraints” or “reframing problems”– but they all learned their approaches through their experiences, not in school. As General McMaster said the parallels were almost “eerie.”

Why is it more important than ever to master a “little bets” approach?

We live in uncertain and rapidly changing times that can make us risk-averse, prone to getting stuck. Little bets provide an antidote. For example, Twitter originated out of little bets made inside Odeo, a podcasting company that was going nowhere. After asking employees for suggestions about what the company should do, Odeo founder Evan Williams gave Jack Dorsey two weeks to develop a prototype for his short messaging idea. Twitter was soon born. Another key reason why the time is right to embrace a little bets strategy is unlike previous generations, people now change jobs every few years and, according to researchers, will even switch careers up to six or seven times over a lifetime. That’s a very new way of relating to our work and careers. Little bets must become a way to see what’s around the next corner, or we risk stagnating.

 

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{ 12 comments… read them below or add one }

Toks Ogun March 28, 2011 at 9:00 am

Very good points. Go Big works if you make it, but if you don’t it can be disastrous.

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Joshua March 28, 2011 at 11:11 am

I really like the post. Makes me interested in the book. I think that life is a series of little bets. You try a new dish at a restaurant, if you like it, that is what you put on the menu at your party. The key is always learning.

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Nuwan Perera April 5, 2011 at 12:33 am

Very good article. This concept is very encouraging as it always focuses on action. Definitely worth reading.

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Kevin Crary April 5, 2011 at 7:26 am

There’s a book called “Have Fun at Work” where the concept of SSRBF, Short Cycle Run, Break, Fix described is very similar to the Small Bets idea.

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rita April 13, 2011 at 5:18 am

Very well described and researched! You choose a great point of view, check out various fields and not only one, to understand that there is a connectiong/shared pattern of those who succeeded in their business! “Sure” they must have tried many times or kinds before IT was born and sold.
“Little bets” is a good title and I wish you success with the book & its many readers!!

rita

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Dan Jaffe April 13, 2011 at 2:00 pm

Peter,

I read Little Bets in proof and it confirmed much of what I believed but could not articulate or prove when it comes to creating great businesses. It is my hope that Little Bets will have a profound role in changing the way businesses are created. I mentioned your work recently in a blog post about attorney marketing, and am trying to show my attorney friends/clients how taking a Little Bets approach to their marketing investments/experiments is much better than betting the farm based on conventional “wisdom” or dominant paradigm.

Great book!

Dan

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Ben Andrews April 29, 2011 at 9:57 am

Great tips, I love the idea of being able to experiment without risking everything, and if it works being able to grow so much more, definitely re-tweeting @indiefilmben

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Pete Austin, marketingXD May 13, 2011 at 12:08 am

Re: “We all want to make big bets. That’s a Silicon Valley mantra. Be bold. Go big.”

WAS a Silicon Valley mantra, not IS. Things changed a while ago. See “agile”. Also “test market”
http://agileprogramming.org/
http://en.wikipedia.org/wiki/Test_market

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bernd October 23, 2011 at 8:39 pm

great book i love “small bets” .. read it together with feynman’s rainbow its pretty neat to see how feynman’s approach to physics , is a sequence of smaller & larger bets ….

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Mark March 1, 2012 at 3:02 pm

The premise for your book got me to your site. Your Wu-Tang t-shirt made me a customer.

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Philip A.D. March 1, 2012 at 7:40 pm

In retrospect, I think I personally experienced a shift in my overwhelming tenancy of the growth mindset to the fixed mindset the moment I began experimenting with debt in college which then grew into assuming massive debt for my business.

At first the change was subtle, but the more I became indebted to creditors and investors the more I was forced to think more like a mediocre business plan consultant than as an entrepreneur, which I think is my greatest strength. I attribute this to the different strategies required to deal other peoples money, a Big Bet too Big for me, and and easy way to go from non-suck to suck very quickly. A sort of shift from grand strategy to tactics or from optimalisim to perfectionism as Tal Ben-Shahar might say.

I wonder if other people have had similar experiences, maybe this is systemic, could this be a root cause for economic malaise generally?

Thank you for writing Little Bets and thus helping me to recall the mindset I had when I was most productive and successful, thinking about the ideas you present so clearly have had a very positive impact on my thinking and I appreciate the tremendous effort, hard work and discipline it must have taken you to produce.

K.R.,
Philip

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