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Digital Business

Protect your small business from extinction

Bad luck can cause a business to go extinct, even if they're doing everything right, so it's important to build up some defences.
Humanity is not a pinnacle of evolution, but an "utterly unpredictable, partly random, and entirely contingent" blip in a distribution pattern - Stephen J Gould

There's a lot of snake oil peddled online, as you're probably aware. There are a lot of strategists and consultants that read the Method in the Madness newsletter and we've probably unwittingly given what we thought was "sound business advice" at some point. A lot of the advice takes the format: if you do x you can expect y. I'm increasingly persuaded that's ill-informed at best and misleading at worst.

Since the pandemic began, I've been staring business extinction in the face. Not just my own business but the small businesses I've been helping too. The environment is tough and has seen a lot of upheavals. The things we thought were predictable simply aren't anymore.

I was listening to a Radiolab episode recently: Life in a Barrel. I learned about some theories of species extinction, challenges to classical evolutionary theory and the impact of randomness on the fossil record. "Survival of the fittest" might actually be a myth given the impact of randomness and totally unpredictable factors on evolution.

These theories are directly relevant to small businesses today. Because random factors and bad luck can cause a business to go extinct, even if they're doing everything right, it's important to build up some defences. The best defence I've come across (so far) is not to put all your eggs in one basket. Daniel Vassallo explains this as making lots of small bets. Coca-Cola talks about this as their 70/20/10 rule - invest 70% in things you know work, 20% in things you're not sure will work, and 10% in the most left-field ideas. As the predictable 70% becomes less predictable, promote promising candidates from the other buckets.

So, to protect your small business from potential extinction, try a set of small bets.

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