I learned my first lesson about calculated risk before I even reached kindergarten.
I was about five or so, and one winter day my uncle and I were cutting cards. I didn’t have money to lay on the table. But I did have my stuff—my worldly treasures. And I bet them gladly, sure I’d win.
And then I lost them. One at a time.
First, I lost my prized belt buckle. I’d been roping nearly half my young life. (Sure, it was chickens I was roping. But still, I took it seriously.) Then went my chaps, my pants, my shirt, and of course, he got my hat too. All I had left was my underwear, and my uncle made me walk across the yard in the snow.
I was really cold and really heartbroken. I’d lost it all. All my prized possessions.
My uncle was teaching me a lesson. And I got it. If you can’t afford to lose it, don’t bet it.
That was the first of many cowboy lessons I learned about risk. Every day, I apply lessons I learned in the rodeo arena to actions I take in the boardroom.
Let me share a few.
1. You have to pay to play. Like all sports, you have to train. But in rodeo, training is just the beginning. Then there’s the equipment.
First, there’s the truck and horse trailer. Then there’s the horse. And you’ve got to get a really good horse. That doesn’t even count the clothing, the food or the gas. And even after you’ve bought all of that, you still have to pay to get into the rodeo.
You’ve got to pay to play. The bigger the rodeo, the bigger the purse—and the bigger the entrance fee.
Which brings me to my next rule.
2. To win big, you have to play big. It’s tempting to enter small rodeos. Small rodeos have cheaper entrance fees. When you’re a young, broke cowboy (and trust me, I was broke all the time) it’s tempting to go small.
Think of it this way. When you go to Vegas, you can play the penny slots. It’s cheaper, but if you hit the jackpot, you’ll only get the penny jackpot. So the big gamblers play the dollar machines and bet a few bucks at a time.
Fortunately, rodeo is a lot less risky than Vegas. But the rules still apply. So I learned to play big.
When I didn’t have the money to enter a rodeo, I borrowed. But as I also learned, I never borrowed what I couldn’t pay back.
3. Hedge. Don’t bluff. Let me be clear here. By hedging, I don’t mean bluffing. Bluffing means I’ve got something in my hand that’s bad and if I lose, I’m in trouble.
Hedging means I’m betting because I think I can win. But if I don’t, I have a backup plan.
Sometimes it means having a fallback job lined up. Me? I shoed horses. You can always find someone around the rodeo who needs a horseshoe. You can make enough money to get gas to get to the next one.
Just like running a startup, right?
4. Bet the ranch, and be willing to lose it. Hedging and being careful doesn’t mean never gambling.
In fact, you should bet the ranch. I did, quite literally, many times but I wasn’t bluffing. I was willing to lose it.
That’s the lesson my uncle taught me. He wasn’t telling me not to bet. He was teaching me that if you do bet, bet big. Be willing to lose it all.
I’ve run lines of credit against my ranch. I do it with a clear head. I accept that if I can’t pay my creditors back, they're going to come and get my ranch.
The same thing happens in business. Right now, in my own business, I'm taking on battles with the giants: IBM, Apple and Google. If I lose, I could lose all the shareholder value that exists.
I don't want to lose that bet. But I have to pay to play.
5. Confidence is good. Cockiness kills. The line between confidence and cockiness can be razor thin. You want to be on the right side of it.
Let me tell you a story that illustrates this perfectly. I was a younger guy and had just moved back to the northwest from Texas. The northwest rodeos were competitively easier than Texas. So I entered a regional rodeo thinking I had it dialed in.
All I had to do was catch this calf and I would win a saddle and a bunch of money. It was a very simple task. But of course, I missed. Because I was cocky.
I was so mad at myself. I thought I was good, rather than being good.
In rodeo and in business, I now apply the same rule: every time somebody gives me a compliment I throw it in the garbage can and remember the things that I better be focused on.
6. Leverage your talents. The good news is you don’t have to be the most gifted to win at rodeo and you don’t need to be the smartest to be successful in business. You just have to learn how to leverage your God-given talents.
I’ve gotten very good at my roping technique. I’m very consistent and pretty dang fast. But I’m only an okay athlete.
But the thing about rodeo, and about life, is you don’t really have to be the best. You just have to know what you’re good at and then you have to work. Hard.
Think of basketball. There are these guys who are insanely athletic. Then, there are other guys who can nail three-pointers. They don’t necessarily have as much athletic ability, but what they’ve learned to do is consistently make a basket.
I’m the three-pointer type in both rodeo and business. I’m the guy who works hard and beats the hotdogs out there.
If you’re a cowboy, you figure out how to take your best assets and make them better. If you’re an entrepreneur, you do the same thing. If you’re in a market that just isn’t happening, you make it happen. It's called early-adopter selling.
7. Don’t quit. Bottom line: you just have to work hard and make your own luck.
There is no freeway to success. That's why so many people don't end up being successful. Because it gets too hard.
In rodeo, you have to believe in yourself. If you’re not performing, you practice. But you don’t quit.
It’s the same in the entrepreneurial world: it's that commitment to your ideas and beliefs and your willingness to bet on them.
Related: Richard Branson on Taking Risks
Copyright © 2013 Entrepreneur.com, Inc.