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Entrepreneurship is a game of Poker



It would be a mistake to think of the returns to entrepreneurship as predictably stemming from just showing up and taking a spin at the wheel of startup roulette. Instead, entrepreneurship is more like poker: a game where even the best players cannot predictably win over a single night, but measurable differences predict that some will earn much more than others on average. By paying attention to predictors of entrepreneurial success (whether good news or bad), you can better tell whether you have a winning hand or should walk away for a different game. And even if the known predictors don’t bear on your own situation, knowing about these predictors can dispel the “lottery illusion”, and can let you know that success is not magic, and that it is worth investing in skill, hard work, strategy, and an understanding of the game.

Let’s take a look at some of those predictors…

Does your invention make business sense?

In Canada, the university of Waterloo is something of an “MIT of the north,” an engineering-intensive school where many students create innovative technologies and sometimes go on to build successful businesses out of them, most famously Mike Lazaridis the creator of the BlackBerry. To help would-be inventors from Waterloo and elsewhere, the government offers an Innovator’s Assistance Program (IAP) to evaluate innovations and their potential for commercialization (e.g. by patenting and licensing, creating a business to sell the technology, etc). Since a huge number of innovators have used the program and outcomes of participants are tracked, a number of academic studies have used this dataset, and found that the program did impressively well in predicting inventor success. This was highlighted in Daniel Kahneman’s recent book “Thinking, Fast and Slow.”

The program assigned numerical scores for a number of categories (market demand, existing competition, difficulty of manufacturing, etc) and combined them to form letter grades from A to E. In a sample of over a thousand inventions, the 2% of inventions with the highest grade were commercialized more than half the time, while the 15% with the lowest grade were never commercialized. Inventions with B and C grades were commercialized about four times as often as D grade inventions (a majority of the total), and 2.7 times as often considering only inventors who continued work after learning their grade.

Overall Rating

Sample Total

Percent of all

Percentage that continue

Number commercial

Percent commercial







A – recommended for







B – may go forward, but

need to collect more data






C – recommended to go

forward, returns likely







D – doubtful, further

development not







E – strongly recommended

to stop further







Weighted Average





Aside from the surprisingly high predictive power of the test (and the high success rate of “A” grade inventions), one thing that stands out is the overconfidence of those receiving the lowest grades: almost half of those with “E” grades persevere in attempting to commercialize their inventions, even though every single one fails. Kahnemann uses this dataset to highlight unrealistic entrepreneurial optimism, even as it displays the accuracy of the “Critical Factors Assessment” test, a simplified version of which is available for free online. If you can update on negative as well as positive information, you will be ahead of the game.

Past start-up success predicts future start-up success

One of the most damning facts about the investment management industry is that, for the vast majority of funds, past returns have almost no correlation with future returns. In other words, most of the skilled professionals in that industry are doing no better than chance for their investors, and worse than that after their fees are taken into account. How does the situation compare for startup entrepreneurs?

One attempt to tackle this question comes from a 2006 paper by Gompers, Kovner, Lerner, and Schwartzstein (2006). They use data on companies receiving venture capital funding between 1975 and 2000, and contrast entrepreneurs receiving venture capital funding for the first time, with serial entrepreneurs who had received venture investments in previous startups. They then measure “success” by whether the firm had made an initial public offering by 2003. Their raw data show that while 25.3% of first-time VC-backed entrepreneurs reach a successful IPO, 29.0% of the serial entrepreneurs do on their second try, and serial entrepreneurs who succeeded the first time are substantially more likely to succeed the second time than serial entrepreneurs who failed first.

When the authors go on to match firms, based on variables such as firm age, they compare the chance of IPO for a firm with typical characteristics on these axes, save for the past experience of the entrepreneur. The chance of IPO 30% with a previously successful (VC-backed) entrepreneur, 20% with one who has previously failed, and 18% with a first-time entrepreneur. The paper also finds that performance differences between experienced and inexperienced venture capitalists are greatest with respect to first-time entrepreneurs and first-time-failed entrepreneurs, but small with respect to entrepreneurs who have previously succeeded, i.e. that expert VCs have some skill in identifying “diamonds in the rough.” (The fact that it is possible to develop such skill indicates that there are identifiable differences between success-prone and failure-prone startups.)

If those numbers seem low for companies that have already received VC funding, you’re right: they don’t include companies that were acquired rather than conducting an IPO; see the Woodward and Hall paper I discussed in my last post on entrepreneurship for do-gooders, for more inclusive numbers (with first-time founding teams exiting with at least $1 million a third of the time). the authors claim that including acquisitions would give results “qualitatively similar” to the aggregate results, so readers would do well to assume the effect sizes are at least somewhat smaller (given researchers’ tendencies to present data in the most interesting light).

Tips from the right tail: how smart is Bill Gates?

Physicist and polymath Steve Hsu offers another angle on predictors of entrepreneurial success: look at the very most extreme examples of entrepreneurial success and note their deviations from the norm. In that post he works his way down the first three slots of the 2009 Forbes magazine list of the world’s richest people, finding Bill Gates, Warren Buffett, and Carlos Slim, and considers strong evidence that they are easily in the top 1%, and perhaps much higher:

Bill Gates scored 1580 on the pre-1995 SAT. His IQ is clearly >> 145 and possibly as high as 160 or so.

Warren Buffett graduated high school at 16 ranked in the top 5 percent of his class despite devoting substantial effort to entrepreneurial activities. Most people who know him well refer to him as brilliant, that folksy quote above notwithstanding. I would suggest the evidence is strong that his IQ is above 135, perhaps higher than 145.

Carlos Slim studied engineering and taught linear programming while still an undergraduate at UNAM, the top university in Mexico. He reportedly discovered the use of compound interest at age 10. I would suggest his IQ is also at least 135.

So it would appear that the three richest men in the world all have IQs that are higher than 90 percent or even 99 percent of the > 120 IQ population. (Relative to the general population they are all likely in the 99th or even 99.9th percentile.) The probability of this happening in the Igon Model (on which cognitive ability above the 90th percentile has little impact on entrepreneurial success) is less than 1 in 1000; (i.e. intelligence matters, even at the high end.)

Other demographic statistics from Forbes’ various “Richest X” lists can help shed light on the importance of education, parental success, and other indicators.

Eyes of the Incubators

Many venture capitalists invest relatively late in the lifecycle of a startup, after it has proven itself in a number of ways. But tech incubators like YCombinator and TechStars invest in numerous very early-stage software/web startups, enough to gain significant expertise, and one that tentatively appears to be confirmed in the results of their investments, which seem comparable to those of funds with later investment schedules. The choices of these organizations can give interesting information for prospective altruist entrepreneurs.

This article examines the Linkedin social network profiles of entrepreneurs backed by these incubators to determine the courses they studied and the universities they attended. About 50% studied Computer Science, 14% Engineering, 4% Physics, 3% math, with almost all the remainder taking social science or humanities degrees. Around 27% attended what the authors described as “top schools” in the U.S., meaning members of the Ivy League, Stanford, and the Massachusetts Institute of Technology. However, this is understates the representation of selective academic programs, since it excludes a number of universities known similarly high-quality student bodies or excellence in computer science, e.g. Caltech, Swarthmore and other top liberal arts colleges, and Carnegie Mellon.

One can also consult the public statements of the incubators, although obviously such statements are biased by the need to conceal business secrets of the selection process, and the desire to encourage entrepreneurs to apply to their programs. For instance, in this interview Ycombinator founder Paul Graham discusses (in addition to high intelligence and skill as a hacker) determination and aggressiveness. If one can arrange a private and frank discussion with such an investor, that will give feedback which is hard to beat for accuracy.

Value of Information

Someone considering entrepreneurship as a way to do good has reason to care about the expected value of their income, including the chances of big success. Taking into account factors like the output of the CFA test for inventors, the results of psychometric tests, past track records, and the (honest) estimates of skilled venture capitalists can multiply or divide the expected value of that course by several fold. That’s reason enough to go out of your way to gather such info, both about yourself and your prospective start-up, when weighing it as a career and as a way to do good.


About the Author

This article was written by Carl Shulman of 80,000 hours. 80,000 Hours is a web platform that is dedicated to helping as many people as possible lead high-impact careers.They do this by providing career advice for talented young people who want to have a social impact. see more.


Is There A Coworking Space Bubble?



An annual growth rate of nearly 100%, almost five years in a row? More than 60 coworking spaces in a city like Berlin? Are these the characteristics of a bubble? Nope, these are characteristics of a lasting change in our world of work, which has been further catalyzed by the recent economic crises in many countries. But what makes this change different to a bubble? We’ve summarized some arguments of why the coworking movement is based on a sustainable change. However, that doesn’t mean it’s an easy job to open a good working coworking space.

Five reasons why the growth of coworking spaces is based on organic and sustainable growth: 

1. Coworking spaces invest their own money and create real wealth

Already, there is a convincing argument supporting why coworking spaces are not developing in a bubble: the fact that they create real wealth.

Whether referring to the dotcom bubble a decade ago or the real estate crisis in Spain or the United States, the crisis originated in a glut of cheap money, in an environment in which the sender and the recipient were unacquainted. From funds and banks, money flowed in steady streams to investments which offered little resistance and the most promising returns – which only a little while later turned into delusions and ruined investments.

Redistributed risks create illusions. Those people who distributed the money rarely wore the risk of investment decisions. The risk was mainly taken by small shareholders or people who bought parts of those investments. This was because either both parties’ (better) judgement was drowned out by the noise of the market, or because shareholders were unaware of the risk, and were at the mercy of banks and funds for reliable information.

Another fundamental condition for the creation of bubbles are the sheer amounts of money that flow from various locations globally and are concentrated, by comparison, in much fewer places.

Most coworking spaces, however, receive their funding from local or nearby sources and do not operate within this financial system. In fact, the founders mainly inject the bulk of the required investment, and turn to friends or relatives for additional support. They wear the full brunt of the risks that are involved in small-time investment.

They have access to much more information, because it is their own project, rather than a foreign one thousands of miles away. This also includes failures and mistakes that are encountered along the way, but the risk is less redistributed, thereby decreasing the probability of failures.

2. Labor market changes demand on certain office types lastingly

Most users of coworking spaces are self-employed. The proportion of employees is also on the rise, in many cases simply because they work for small companies that increasingly opt to conduct their business in coworking spaces rather than in traditional offices. The industry of almost all coworkers fall within the Internet-based creative industries.

With flexibilisation of work markets, new mobile technologies that are changing work patterns, and the increase of external services purchasing from large and medium-sized enterprises (outsourcing), the labor market has changed radically in many parts of the world.

The long-term financial and emotional security of becoming an employee no longer exists, especially for younger generations of workers. Bigger companies are quicker to fire than hire, and precarious short-term contracts are on the rise. Promising options on the labor market are more often recuded to freelancer careers and starting your own company.

And that’s possible with less money to invest. All you need is a laptop, a brain and a good network. For years, the number of independent workers and small businesses has been growing worldwide – particularly in internet-based creative industries. Anyone who has sufficient specialized skills and the willingness to take risks may adapt more quickly to market conditions if they own a small business or are self employed; more so than if they were to work in a dependent position in an equally volatile market.

Coworking spaces provide an environment in which to do this. Once they have joined a (suitable) coworking space, these factors become apparent to coworkers, who will remain in their space for years to come.

Furthermore, independent workers rarely fire themselves in crises, and even small companies are less likely to give their employees the boot – compared to their large counterparts. This combination enables more sustainable business models – and less business models à la Groupon.

3. Coworking spaces don’t live on crises

Global economic growth is waning while the number of coworking spaces is continually growing. Do coworking spaces thus benefit from this crisis?

The current crises accelerate the formation and growth of coworking spaces, because they offer solutions and space for the resulting problems. Coworking spaces are therefore not a result of a crisis, but the product of change that pre-dates their existence. A crisis is simply the most visible expression of change.

The first coworking spaces emerged in the late 1990s; the movement’s strong growth started six years ago – before the onset of economic downturns in many countries.

4. Coworking spaces depend on the needs of their members

Most coworking spaces are rarely full. Does this mean they are unsuccessful? On average, only half of all desks are occupied. But the average occupancy rate of 50% refers only to a specific date.

In fact, coworking spaces generally serve more members than they can seat at any given time, since members do not use the spaces simultaneously. Coworking spaces are places for independents who want to work on flexible terms. Smaller spaces rely more on permanent members. Larger spaces can respond more flexibilty to the working hours of its members, and, can rent desks several times over.

If a coworking space is always overcrowded or totally empty, the purpose of said space would be defeated. Firstly, it is rather impossible to work in an overcrowded room. Second, it’s impossible to cowork in an empty room. Given the nature of flexible memberships, a coworking space only can survive if they fit the needs of their members. Members would otherwise be quick to leave, and membership would be much more transient.

5. The coworking market is far from saturation

Less than 2% of all self-employed – and even fewer employees – currently work in coworking spaces. Reporting on coworking may increase, but inflated reporting on the coworking movement in the mainstream media is still far away.

Coverage of coworking space are most likely to be found in the career or local sections in larger publications – front cover coverage remains the dream of many space operators. This is because the whole coworking movement can’t be photographed in one picture. What appears to be a disadvantage, however, is actually a beneficial truth: niche coverage allows the industry to grow organically, and avoid over inflation.


Coworking spaces don’t operate in parallel universes – like the financial market. Demand and supply are almost exclusively organic and operate in the real world economy.

For the same reason, there is no guarantee that opening a coworking spaces will be automaticly successful. Anyone who fails to learn how to deal with potential customers in their market, or is unfamiliar with how coworking communities function, will have a difficult time of making one work. In the same way that business people in other industries will fail if they do not understand their market.

Those who simply tack on the word ‘coworking’ to their space’s facade will need to work harder. The structure of most coworking spaces is based on real work, calculated risk, and real-world supply and demand.


About the Author

This article was produced by Deskmag. Deskmag is the magazine about the new type of work and their places, how they look, how they function, how they could be improved and how we work in them. They especially focus on coworking spaces which are home to the new breed of independent workers and small companies. see more.

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Callum Connects

Dextre Teh, Founder of Rebirth Academy



Dextre Teh is a consultant and marketing guru, helping F&B businesses to tighten their operations and grow their businesses.

What’s your story?
I help frustrated F&B business owners stuck in day to day operation transform from a glorified operator into a real business owner. I’m a 27 year old Singaporean second generation restaurant owner and a F&B business consultant. Entering the industry at 13 years old, I have always been obsessed with operations and systemisation. At the age of 25, I joined the insurance industry and earned a six figure yearly income. However, I left the high pay behind because it was not my passion and returned to the F&B industry. Now I help other F&B companies to tighten operations and grow their businesses with my consulting and marketing services.

What excites you most about your industry?
The food. I’m a big lover of food and even have a YouTube show on food in development. But that aside, it is really about impacting people through food. Creating moments and memories for people, be it a dating couple or families or friends. Providing that refuge from the daily grind of life. So in educating my consulting clients and training their staff to provide a better experience for their customers, I aim to shift the industry in the direction of creating memories instead of just selling food.

What’s your connection to Asia?
I was born and bred in Singapore. I love the culture, the food and travelling in Asia.

Favourite city in Asia for business and why?
Singapore hands down. The environment here is built for businesses to thrive. The government is pro business and the infrastructure is built around supporting business growth. Not to mention the numerous amount of grants available in helping people start and even grow business. If I’m not mistaken, the Singaporean government is the only government in the world that offers grants to home grown businesses for overseas expansion.

What’s the best piece of advice you ever received?
Learning to do things you do not intend to master is a BIG mistake in business. Focus on what you are good at and pay others to do the rest.

Many business owners including myself are so overwhelmed by the 10,000 things that they feel they need to do everyday. We try to do everything ourselves because we think it saves us money. The only thing that, that does for us is overload our schedules and give us mediocre results. Instead we should focus on what we do best and bring in support for the rest.

Who inspires you?
Christopher M Duncan.

At 29, Chris has built multiple 7 figure businesses. He opened me to the possibility of building a business on the thing that I loved and gave me a blueprint of how to do it. He also showed me that being young doesn’t mean you cannot do great things.

Imran Mohammad and Fazil Musa
They are my mentors and inspire me every single day to pursue my dreams, to focus on celebrating life and enjoying the process of getting to where I want to be.

What have you just learnt recently that blew you away?
Time is always more expensive than money. Money, you can earn over and over again but time, once you spend it, will never come back.

If you had your time again, what would you do differently?
I am a firm believer that your experiences shape who you are. I am grateful for every single moment of my life be it the highs or the lows, the successes and the failures because all these experiences have led me to become the person I am and brought me to the place that I’m at so I will probably do things the same way as everything was perfect in its time.

How do you unwind?
Chilling out in a live music bar with a drink in hand, listening to my favourite live band, 53A. Other than that I’m big on retail therapy, buying cool and geeky stuff.

Favourite Asian destination for relaxation? Why?
Bangkok. It feels like a home away from home where the cost of living is relatively low, the food is good and the people are friendly.

Everyone in business should read this book:
Everything you know about business is wrong by Alastair Dryburgh. It is a book that challenges commonly accepted business “truths” and inspires you to go against the grain, think different, take risks and stand your ground in the face of the challenges that will come your way as a business owner.

Shameless plug for your business:
I’m the creator of the world’s first Chilli Crab Challenge. It gained viral celebrity earlier this year with 3 major newspaper features and more than a dozen blog and online publications featuring it in the span of two weeks. In the span of the two weeks, the campaign reached well over a million people in exposure without a single cent spent in ads.

Now I help F&B companies to tighten operations, increase profits and grow their businesses with my consulting and marketing services. Chilli Crab Challenge (

How can people connect with you?
You can connect with me on Facebook ( or visit for more information or book a 10 minute call with me @

This interview is part of the ‘Callum Connect’ series of more than 500 interviews

Callum Laing is an entrepreneur and investor based in Singapore. He has previously started, built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’.

Connect with Callum here:
Download free copies of his books here:

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