Ah, the intricate interplay between randomness and entrepreneurship, a terrain far more complex than what most “experts” in suits with MBAs would have you believe. Their PowerPoint slides and Excel models attempt to quantify and predict, but let’s cut through that illusion. Entrepreneurship is often too romanticised as a playground for the skilful, the brave, and the disciplined. Yet, in this idealised narrative, the elephant in the room remains largely ignored: randomness. A topic so central, it’s scandalous how underestimated it is. Randomness is therefore an important topic of my research for my first, and upcoming, essay “A Posteriori”. Have a read through some random thoughts on the topic…

Social Serendipity or the Monte Carlo Method of Networking

Plato once said, “People are like dirt. They can either nourish you and help you grow as a person or they can stunt your growth and make you wilt and die.” Our friends, colleagues and associates (even our family) can be the rich soil that nourishes our growth or they can be the barren desert. Entrepreneurship often flourishes in the fertile grounds where serendipitous encounters can take place. A casual meeting at a conference, a random email, or even a misdialed number could end up being the connection that takes a business to the next level. The unpredictability of these relationships adds an element of randomness that can be neither planned nor quantified. Even an exit can be the result of a serendipitous encounter at a conference, as was the case in one of my past acquisitions in 2020. But people love to preach about the power of networking, as if it’s a deterministic machine where input yields predictable output. Rubbish. In reality, it seems to be more akin to the Monte Carlo simulation: a game of probability and randomness, where any coffee meeting could either lead you to your next venture capitalist or waste an hour of your life that you’ll never get back. Things you cannot plan, predict or control.

Market Unpredictability and Adaptability

Economies shift, new technologies emerge, and consumer preferences evolve often in ways that are nearly impossible to predict. An entrepreneur’s ability to adapt and pivot is tested by these unpredictable shifts. Yet, some entrepreneurs speak of market trends as if they were as simple as Euclidean shapes: predictable, consistent, clear. They forget that the marketplace is more like a fractal, self-repeating patterns at different scales, beautifully complex and impossible to predict with total certainty. Remember Heraclitus? Even he understood the fractal geometry of chaos that shapes markets, when he stated how “Change is the only constant.”

Black Swan Events in Entrepreneurship

Drawing inspiration from Nicholas Nassim Taleb, these are the events that are impossible to predict but have monumental impacts. The fall of Lehman Brothers or the COVID-19 pandemic are macro examples, but on a smaller scale, think of a sudden regulatory change or a single software release that transforms a small business overnight, such as OpenAI’s ChatGPT. Such events serve as a stark reminder of the role of randomness and the importance of anti-fragility in business strategy. Think you’ve secured all the variables? Considered all the risks? You’re wrong. Black Swans will appear, often without warning. While businesses crash and burn, they also offer the biggest opportunities for those robust or, better yet, antifragile enough to capitalize on them.

Risk Taking as Aleatory Contracts

Albert Einstein, who was no stranger to the powers and limitations of mathematics, once said, “God does not play dice with the universe.” Yet, entrepreneurs must do so with their ventures. Calculated risks are still risks, and the outcomes are often governed by variables beyond one’s control. Whether it’s choosing to pour resources into a new product line or deciding on an overseas expansion, you can strategise all you want, but sometimes the outcome depends on a roll of the die, a flip of the coin, or, if you’re partial to ancient Greek sports, a throw of the astragalus.

Human Resources or the Gaussian Copula of Doom

Assembling a stellar team is envisioned by many as the careful assembly of a Swiss watch. Sifting through hundreds of candidates in a controlled manner, where a stringent hiring process keeps things in check, and inevitably lead to the best hire. If only things were so easy. In reality, it’s more like solving a multivariable equation where some variables are not just hidden but downright deceptive. People are complex, and the dynamics they create are even more so; subject to emotional whims, psychological biases, and what I’d call the “Gaussian Copula of Doom“, an underestimation of the probability of joint failure.

The Random Walk of Innovation

Inspired by the random walk hypothesis in financial markets, one might see innovation in entrepreneurship as a series of stochastic events. The path from idea to successful product is rarely a straight line. It’s more akin to the path described by a Brownian particle, influenced by a multitude of small, often random, forces that eventually shape its trajectory. Pinging around, colliding with walls and obstacles, influenced by countless random events that may eventually steer it in a profitable direction. A bit like the philosophical concepts of Epicurean atomism; if atoms swerving randomly in the void can create complex realities, so can your chaotic attempts at innovation create successful products

Memento Mori

Business longevity, or the arrogance to think one’s enterprise is eternal! All are subject to the ultimate leveler: time. Every business, no matter how fortified, is built on the sands of impermanence. A recent study by McKinsey found that the average life-span of companies listed in Standard & Poor’s 500 was 61 years in 1958. Today, it is less than 18 years. Take a page from the Stoics; keep a skull on your desk and remember, your venture too will pass. One of the reasons why I stick to my adage “that you only get wealthy by selling too soon“; besides cash or stock (preferably both), it mainly buys you optionality and one avoids having to attend the eulogy of a company. Ergodicity only stretches that far…

It seems that entrepreneurship is not a field for those with an illusion of control but for pragmatic doers who understand that randomness is not an obstacle but a landscape. To paraphrase Seneca, luck is what happens when preparation meets chaos. It’s one topic that I will be investigating much deeper in the first chapter of my upcoming essay. Feel free to share your comments below!