Business: Risky Riches on the Path To Becoming a Millionaire
Hey guys, I want to introduce you to one of my friends Billy.
Billy has a huge success story as an affiliate, and he used to be a professional poker player.
He’s got some great insights from being a poker player that have helped him becoming a millionaire affiliate, so he wanted to write up a guest post for you guys.
Thanks for taking the time Billy, appreciate it bro!
One of the most misunderstood words in the world.
I mean, the word itself is easy to understand.
It’s the interpretation of what’s actually risky, and what’s not that people seem to struggle with.
Even very smart business people often struggle with what to do with risk.
If something seems too “risky”, many stay away even if it was an incredible opportunity.
They often miss out because they fail to understand how to interpret risk correctly.
So, how do you avoid being like almost everyone else?
How do you avoid passing up great business opportunities, or investments, or campaigns or any other decisions that at first glance seem too risky to entertain?
In short, expected value.
Expected value is what I often refer to as Millionaire’s Math.
Your chances of becoming a millionaire skyrocket once you actually know how to make decisions applying expected value.
The definition of expected value is this: the sum of all possible values for a random variable, each value multiplied by its probability of occurrence.
How can you apply this to your business?
Well, for starters, you need to incorporate it into all of your decisions when running campaigns.
A campaign is not a “risk” of X amount of dollars, it’s an expected value of Y.
The amount of money at risk is not even relevant unless you don’t have enough to continue playing if you lose. Proper bankroll management is obviously important, but otherwise, you should be focused on putting yourself in situations with the highest expected value(EV).
The riskiest move you can make is not taking the risks at all. Asking if something is “risky” without actually calculating the EV is a monumental mistake. What can seem risky at first glance will often turn out to be a no-brainer.
Let’s look at beginners first.
For a beginner, it can be difficult because on your initial campaigns you may not be +EV.
But the thing is, if you don’t start you won’t learn the lessons from your mistakes that you’ll need to know, which will allow you to reach your success.
Think about it like this:
- Each one of us starts the game as an entrepreneur with a coin.
- You are going to flip this coin every time you play the game.
- Heads you succeed; tails you fail.
The coin will not go your way every time. You will have some variance; the lesson is to get used to it.
Each time you play the game you will be handed the same coin, but it’s not quite the same anymore.
In the game of business, the coin becomes weighted in your favor the more you play. The reason is because of your knowledge learned from past failures and experience, which gives you the edge you didn’t have before.
Consider this …
If you knew the coin was weighted in your favor, and someone allowed you to flip for money as many times as you wanted, how many times would you flip?
You would never stop flipping the coin, and by doing this would end up very rich. It would be mathematically impossible not to be.
It’s the same in business as an entrepreneur. Some people flip the coin once or twice, and give up because the first few attempts did not go the way they wanted.
Some never flip at at all.
If you go into business with the understanding of variance, you’ll be mentally prepared to endure it. Do not forget that in the game of business the more you flip the coin, the more weighted the coin becomes in your favor since you are learning as you play.
Once you flip, you will never play the game the same again.
You will be playing with a weighted coin.
It’s not just beginners that struggle with an improper mindset of risk though…
Many experienced people pass up major opportunities because they don’t want to risk profits by putting them into campaigns that may be viewed as “riskier”.
Again, you should be focused on putting yourself in situations with the highest expected value(EV).
That should be your #1 priority.
If you’re ‘saving’ profits, all it really means is you’re losing future profits.
What I mean by that is, the money you ‘save’ is -EV if you’re a winning player.
If you keep the money in a place where the expected value of the profits are less than they would be if you put it back into your campaigns, or somewhere else in your business, you’re making a -EV decision.
Yes, you don’t lose today…
But you do lose in the long run.
Many ‘winning players’ whether it’s affiliate marketing, or really any other business will spend too much time chasing after losses getting caught in the trap of sunk cost fallacy. They’ll try to ‘win back’ losses on a bad campaign.
Yet, many won’t want the ‘risk’ of taking long shots. Well, consistent -EV bets makes your chances of becoming a millionaire a longshot.
I don’t think most people realize how many decisions we make on a daily and weekly basis, and the compounding effects of those decisions and how they lead to our future wealth, or lack thereof.
Charles doesn’t live the life you see him living because he made a few bucks, tucked it away in his bank and tried not to lose it.
He lives a great life because he’s consistently made +EV decisions over a long period of time. Not only does his money compound from this, his skills also compound over time, because he keeps pushing the level of game he’s playing, so his money and skills continue to move up.
He’s not a millionaire because he had some good campaigns. He’s a millionaire because he made good decisions. Those decisions led to good campaigns. Those good campaigns led to money, and then Charles kept making good decisions as the cycle repeated itself.
He continued to make good decisions, and not fall into certain traps that others fall into.
There’s a lot of people who are good at campaigns. Yet, most of them don’t have much to show for it.
Why is that?
More than likely, they started making -EV decisions along the way.
- Maybe it was because they chose to keep their money ‘safe’ instead.
- It could’ve been making -EV decisions by not continuing to grow their campaigns.
- Maybe it was making -EV decisions investing in a bad campaign, feeling overconfident about their skills, or not properly having good bankroll management.
You can always track back results.
Results are nothing but a large combination of decisions made over time.
The financial result you have today is a result of the many, many financial decisions you’ve made on a daily or weekly basis over the last years, or decades. Nothing more, nothing less.
Nothing more, nothing less.
If you don’t have the result you want yet, it’s not because of ‘bad luck’ or some other limiting belief. It’s because the decisions you made weren’t optimal. You weren’t making enough +EV decisions to get a more significant result.
As of today, you should think of every decision you make like this:
Is this +EV or -EV?
Choose the +EV route, despite our natural reaction to avoid risk and unknowingly choose the -EV route.
Over time, it’ll become easier and easier to make the optimal decision.
And over time, consistent +EV decisions will start compounding into some pretty substantial results.
When you become a millionaire, all the people making -EV decisions will dismiss your success as ‘luck’.
Just smile in amusement, enjoy your affiliate marketing success, and keep making optimal decisions.
When planning your path to becoming a millionaire remember…
- Expected value should be your #1 priority
- Ask yourself if this is a +EV or -EV decision
- Compound +EV decisions until you get the result you want, don’t stop once you get a little success.
- Enjoy the fruits of your +EV decision making.
If you want an easy ‘cheat sheet’ to use for calculating your EV on projects, you can download the one I use here:
Billy Murphy is a former professional poker player turned entrepreneur. He’s started multiple companies from a 7 figure poker training business, to over 20 e-commerce stores. He also trains others how to start profitable businesses, and shares his business knowledge on the ForeverJobless.com blog and podcast.
If you guys enjoyed this post, let us know!
This topic relates to the concept of risk management vs risk avoidance which I wrote about earlier this year.