Is There A Mathematical Formula for Success? This VC Says Yes

is there a mathematical formula for success chris yeh

If failure is more likely than success, then is success quantifiable? Wasabi Ventures’ Chris Yeh says it is … here’s his mathematical formula for success.

aNewDomainChris Yeh mathematical formula for success — If you’re really luck, you might succeed almost as soon as you start trying. In that case, you  retire immediately and rest on your laurels.

That’s unsatisfying, though. Las Vegas was build on the intuition that few people have the willpower to walk away from the roulette wheel right after they win. And even if you do, get used to living with the L word — lucky! — for all the rest of the days of your life.

Most people concentrate on maximizing their chances of success.  If I just think hard enough, I can think and plan my way to success, they say.
mathematical formula for successBut intelligence, hard work and brilliant insight only increase the chances of success. They certainly don’t guarantee it.
As my smart, hard-working friend Mark Pincus likes to say, “I started one of the first three social networks, and I still managed to fail.”
Is there any reliable way to tilt the odds fully in your favor? I say yes. Here’s the mathematical formula for success that we venture capitals use. Check it out.

A mathematical formula for success

The best strategy for increasing the probability of success is to increase your number of attempts to succeed.
In soccer and hockey, they call that “shots on goal.”
Increasing shots on goal not only improves your your expected number of successes. It also reduces your chances of ending up with zero successes.
But the numbers game doesn’t change the expected value of each attempt. To make the numbers game work, you need to do more than just shoot more. You need to reduce the cost of failure.
mathematical formula for success If you reduce the cost of failure, even a string of failures can’t take you out of the game. If you’re forced to leave the table when you’re down, you’ll never end up in the black.

Also, you have to aim high — just not so high as to eliminate the chances of success. You want to tweak it so the rewards of each success far outweigh the costs of the failures along the way.

What we end up with, then, is a formula that looks something like this:

Success = Sum (1 to N, where N = #Attempts) for f (Chance of Success * Benefits of Success – * Cost of Failure)

Feel free to offer a better mathematical statement in the comments; I’m not a mathematician. But you get the idea.

This formula describes the same problem venture capitalists are usually trying to solve for. Think about it. VC funds invest in 20+ companies per fund, giving them a very good chance that they’ll have at least one success, and a good chance to have more than one. To reduce the cost of failure, they set up funds that let them invest smaller amounts up front and double down on early winners.

The option value to abandon investments that don’t seem to be working helps reduce the average cost of failure in the portfolio.

Venture capitalists tend to focus on “venture scale” investments — that is, startups that could conceivably be worth billions of dollars. Outside outcomes like a Facebook, Google or Amazon sure can make up for a multitude of failures, after all.

Do you have to be a wealthy venture capitalist to follow this strategy?

Nope.

I’ve employed it in my own life by being open to interesting and unusual opportunities, by avoiding anything that risks my financial or professional ruin and prioritizing potential upside over what I believe is just an illusory sense of safety.

I have failed many more times than I care to remember, but because I kept the costs of my failures low and stayed in the game, people only seem to remember my successes.

I guess I’m lucky that way.

For aNewDomain, I’m Chris Yeh.
Ed: An earlier version of this piece ran on Chris Yeh’s Adventures in Capitalism. Find it here.
Cover image: BenHarperDigital, All Rights Reserved. Inside image: SusanTrivers.com, All Rights Reserved.

About the author

Chris Yeh

Based in Silicon Valley, Chris Yeh is dean of the startup education program at Wasabi Ventures.