Pay to Make Decisions Easier
One strategy I focused on in poker was keeping decisions simple. Simple choices are better than complex, always. It sometimes even makes sense to pay an additional bet to simplify a tricky decision. In business, the concept of paying an extra bet to facilitate a decision can help too. If you aren’t sure if you should fire a 3rd party vendor or an internal employee, the temptation is to take the easy route and stay the course. But what might be better is to up the ante and clarify your decision. Why wait?
Here is how it works in poker. Let’s say you are playing Texas Hold ’em, and you are dealt a flush, five hearts. The highest heart you have is the King; this is currently the second-best possible hand to the Ace high flush. It’s not the “nuts,” best hand possible, but it is powerful.
From my experience of playing thousands of King high flush hands, the results come in two flavors, 90% of the time you win a big pot, and about 10% of the time, you get burnt and lose a lot. If you are playing a winner take all tournament, often this hand can cause you to lose the competition.
Before the betting starts, this is like the situation of having a new hire or a new 3rd party contractor or marketing agency. Things look great, but you can’t be 100% confident how it will play out.
With the King high flush, if I bet, and an opponent re-raises my bet, this is concerning. It isn’t guaranteed to be a bad sign, but now the focus should be on identifying if this hand is a loser. Here is a spot where an extra bet can simplify the complicated decision.
Here I would bet again, a third bet. If my opponent responds with an all-in bet, I give him credit for the better hand; if not, I proceed assuming I have the best hand. It costs a bit of money, but it saves me from further pursuing a losing hand.
I have successfully applied this same strategy with a 3rd party marketing agency. The output was below expectations for the first six months of the contract. It wasn’t clear if their processes were slow or the agency didn’t have the right talent to meet our needs. It was a complicated decision because finding another agency would require us to start back at square one.
To simplify the decision, we requested additional work outside of the contract. We had the marketing agency create a video case study for a price tag of $5k.
The marketing agency set high expectations for the video, but they didn’t deliver. They created a case study video, but the quality wasn’t there. This result made our decision simple. We dropped the agency and started over.
In our estimation, it likely would have taken another six months and $60k of work before we pulled the trigger and fired them. Instead, we bet $5k to save $55k and six months’ worth of time.
Are you facing any tough decisions where an extra bet could help?