In 2004, Annie Duke, a professional poker player, mom of four and former PhD student in Psychology at the University of Pennsylvania, won her first and only World Series of Poker title. Duke retired from poker in 2010, but is still considered an inspiration, role model and mentor for many of today’s best female poker players.
Since 2010, Duke has transitioned from poker pro to consultant, speaker, decision-making expert and author. Earlier this year, I read Duke’s 2018 book, “Thinking in Bets: Making Smarter Decisions When You Don't Have All the Facts” and judging by the fact I finished all 288 pages in two days, you could say I enjoyed it.
While you’ve potentially never heard of Annie Duke, you likely have heard of Seth Godin, who said of the book, “Brilliant. Buy 10 copies and give one to everyone you work with. It's that good.” While I didn’t immediately go out and buy 10 copies for all my co-workers, telling them (and you) about it here is probably just as valuable!
Weighing Marketing Decisions vs. Results
One of the concepts that Duke discusses in the book is the difference between bad decisions and bad results. As a long-time recreational poker player and a long-time professional marketer, this concept really hit home for me. Just because you make the best decision possible does not mean that the results will be positive. And vice versa: sometimes bad decisions lead to good results.
As a marketer, the idea that bad decisions can lead to good results and good decisions can lead to bad results should be something you have vast experience with, even if the concept is not something you have invested time in understanding.
If you did start to dig into this concept and did some soul searching, you’d realize that marketing, especially in B2B, is a lot like gambling. Marketers put their chips (budget) in the middle of the table (programs) and hope that the cards (prospects/opportunities) make you a winner. Once you make the investment in a marketing program, and put in the effort to execute, the results are often out of your control.
Here’s two real-life examples of what I mean:
You send your C-List sales team, you have a booth in the back corner of the room, you have no speaking placements, and your electronics were shipped late and didn’t arrive until Day 2. Somehow the event, which cost you $100,000 generates a whale of a prospect and nets you a $500,000 deal.
You send your A-List sales team, you have a prominent booth location near the entrance with kick-ass content and you have two speaking placements. You end up with a bunch of decent prospect opportunities, but nothing that makes it past early stages of the sales cycle, and your $100,000 investment nets you $0 in revenue.
Just because Tradeshow A had the better result doesn’t mean it was the result of a good decision. And just because Tradeshow B had poor results doesn’t mean it was the result of a bad decision. This is one of the fundamental focuses of Duke’s book, and it’s one that is often forgotten in our maniacal focus on ROI. It’s not enough to know that something had good results — we must also know the quality of the decision that led to that result. For Tradeshow A, you made a bad bet and it worked out. In Tradeshow B, you made a good bet, and it didn't work out.
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Big Bets, Risk Tolerance and Marketing
The book also discusses risk in a way that I found helpful and impactful. As a marketer whose responsibilities cover budget and performance, it is imperative that you understand the risk profile and risk tolerance of your company and your leaders.
Does your company reward big results or steady results? Does your company support or criticize failing big? Does your boss care about hitting the number through conservative investments or does she like going for the home runs? Is predictability a valued trait? These are some of the questions you should be asking and answering in order to understand your company’s risk tolerance. The answers to these questions should be helping you build your marketing plan and help you decide how to spend your budget.
Every company I’ve worked at has promoted the concept of “Big Bets” during annual planning cycles. The leadership team identifies certain areas of the business that they want to over-invest in with the hope of a positive return on that investment. There was something about these bets that always confused me, but it wasn’t until reading Duke’s book that my struggle with the concept crystallized.
When you make a “Big Bet” you must be willing to take a big risk of loss. But from my experience, corporate leaders who speak of Big Bets will not accept the loss that, based on the definition of a Big Bet, is likely to occur.
Consider these scenarios:
- Bet 1: You and your friend decide to flip a coin. If the coin comes up heads, you pay him $100. If it comes up tails, he pays you $100.
- Bet 2: You and your friend decide to roll a die. If the die rolls a 1, you pay him $500. If it rolls any other number, he pays you $100.
- Bet 3: Same as Scenario 2, but the roles (no pun intended) are reversed.
- Bet 4: Your friend picks up a number between 1 and 100. You have to guess the number. If you guess it correctly, he pays you $9,900. If you guess it wrong, you pay him $100.
- Bet 5: Same as Scenario 4, but the roles are reversed.
Now, would it surprise you that in each of these five scenarios, you and your friend have the exact same expected ROI? If you were to play out these scenarios an infinite number of times, you and your friend would each end up with the same amount of money in your bank account as you started with.
But in a world where each scenario is only played out once, whether you choose to make each bet or not has nothing to do with the expected return and everything to do with how much risk you are willing to take on.
Related Article: Stop Overpromising Content ROI and Start Delivering Content ROE
Big Bets, Big Risks, Big Rewards
Now let’s go back to the leadership team that is talking about Big Bets. When your CEO lists out the Big Bets for the year, how much do you think she is willing to lose in order to win that big bet?
Do you want to chase after the $1 million prospect whale with a 10% chance to win ($100,000 expected value, but 90% chance at $0), or do you want to focus on 10 smaller deals of $50,000 each that have 20% chance to win ($100,000 expected value, but very small likelihood of getting shut out)?
The answer may not be the same at every company, but the math required to understand the expected return and the research required to understand your leadership’s risk profile is the same. Your decisions on how you spend your money and your time must be directly related to the type of investments (and risk) your company is most comfortable with
Remember those questions I suggested you ask above to determine your and your company’s risk tolerance? Well the answer to those questions will help you understand whether your company culture supports “whale hunting” or not.
Face the Facts: You Are a Gambler
I find it extremely ironic when I encounter marketers who tell me they don’t gamble. Any marketer who makes decisions on what lead-gen programs to run, which events to attend, or how much to spend on paid media, are in fact some version of a professional gambler.
They are deciding to invest time and money in one thing at the expense of something else. They are using the information available at that moment to make decisions that they hope will result in the best outcome for their business. But really, what they are doing is placing a bet that they hope will either result in a win for the business or a loss that their leadership team is willing to swallow.