Sent on June 10th, 2022.
If you aren’t a subscriber to EGD News, you can subscribe here.
It may be luck, but it is not an accident.Chris Sacca
There are moments when the stars align, and things just work out.
Many people question how much luck is involved in people enjoying success in startups. Supercell became a company worth over $10 billion. Small Giant Games found success with Empires & Puzzles and sold to Zynga for over $800 million. Some might look at my journey with Next Games, doing an IPO and later selling to Netflix, as being lucky.
I wanted to look for inspiration and understand what role luck plays in these “stars align” moments by looking at some thinkers I’ve studied and what they say about luck.
Make your luck
I’m a big fan of AngelList co-founder Naval Ravikant (If you haven’t read up on him, you should check out The Almanack of Naval Ravikant)
In 2018, Naval put out a Tweetstorm called “How to get rich (without getting lucky),” where he went through some thought-provoking insights into his philosophy on creating wealth.
He later expanded this into a podcast series, and one of the most important pieces was on luck, called “Make Luck Your Destiny.”
Naval says that there are four kinds of luck:
1) Blind luck — Something entirely out of your control happens. Call it fortune or fate, but you had nothing to do with causing this luck. I.e., getting Apple featuring when your game goes out.
2) Luck from hustling — This is luck that comes to you through persistence; continue doing things, learning, and finally, you find success. I.e., Rovio developed fifty games before they developed Angry Birds.
3) Luck from preparation – Chance favors the prepared mind. Through your skills and knowledge, you have an advantage in spotting opportunities that might seem like luck from the outside. I.e., everyone who pivoted to mobile games in 2012.
4) Luck that finds you — You are in a position where events happen to you because of what you have become. I.e.
Supercell’s founders bore all of these four types of luck.
Blind luck: having a startup with the right team and enough funding, right at the moment when the touch screen enabled devices from both Apple and Google became mass-market products.
Luck from hustling: the founders had spent years in gaming, trying to create success, first with their company Sumea, then with Digital Chocolate that had acquired Sumea. Then as they started Supercell, they continued hustling but creating a multiplayer combat game Gunshine. They were hustling to make their luck.
Luck from preparation: during the Digital Chocolate years, the founders had gone through the “Operator University of Gaming” under the tutelage of CEO Trip Hawkins, founder of EA. They knew from experience what would be challenging in building a big games company. They knew that independent teams were the only working model to foster creativity. They knew that a flat hierarchy was the only way to get management out of the way when creating great games. They knew they needed several shots on goal, so they built several teams to build games.
Then finally, the luck that finds you:
As Nivi, Naval’s business partner, says in the podcast: “by pursuing [all four lucks], you essentially run out of unluck. So, if you just keep stirring the pot and stirring the pot, that alone you lead you to run out of unluck.”
Return on luck
In Great by Choice, Jim Collins and his research team wanted to understand the role of luck in the success of companies, which they called the “10X companies.”
“We defined a luck event as one that meets three tests: (1) some significant aspect of the event occurs largely or entirely independent of the actions of the key actors in the enterprise, (2) the event has a potentially significant consequence (good or bad), and (3) the event has some element of unpredictability.”
They set out to understand the role of luck by findings answers to these three questions:
- Is luck a common or rare element in the histories of the 10X and comparison cases (companies in the same era and same field but didn’t become 10X)?
- What role, if any, does luck play in explaining the divergent trajectories of 10X and comparison cases?
- What can leaders do about luck to help them build great companies on a 10X journey?
Based on their research, they concluded that there was one correlation between lucky events and the success that the companies had. The correlation was always tied to the people involved, and how they had invested time and effort into their work, and when lucky events happened, they could fully capitalize on the lucky event.
The evidence leads us to conclude that luck does not cause 10X success. People do. The critical question is not “Are you lucky?” but “Do you get a high return on luck?”Jim Collins, Great by Choice
The exciting finding from Collins’ research was the inaction of the comparison companies, the squandering of good luck, or another way of saying it: poor return on good luck.
In the mid-1990s, Intel and AMD were competing to become the dominant microprocessor supplier for PCs with the personal computers market booming. Two good-luck events hit AMD.
Event 1. The federal court killed Intel’s monopoly. In 1991, AMD filed an antitrust lawsuit against Intel, claiming they were trying to secure and maintain a monopoly. One year later, the court ruled against Intel, awarding AMD $10 million “plus a royalty-free license to any Intel patents.”
Event 2. The 1994 Pentium chip scandal. IBM halted shipments of computers that used Intel’s Pentium chip due to a highly publicized glitch that caused a rounding error in specific rare calculations. Intel eventually announced a $475 million charge against earnings to replace Pentium chips for its customers.
What happened? AMD failed with both luck events by not getting its new K5 chip into the market in time before Intel had already developed a new and better version of the Pentium processor.
Then a third lucky event happened:
Event 3. AMD leaped ahead in chip development. AMD acquired NextGen, which developed a faster and cheaper alternative for Intel’s Pentium Pro.
But yet again, production problems made it impossible for AMD to get enough chips to the market, and computer makers went with Intel’s chips instead.
Jim Collins puts it well:
The AMD story illustrates a common pattern we observed in the comparison companies during their respective eras of analysis, the squandering of good luck. When the time came to execute on their good fortune, they stumbled. They didn’t fail for lack of good luck; they failed for lack of superb execution.
I want to end with something that Kristian Segerstråle said on my podcast.
I also would add a giant disclaimer: a little bit more paranoia, in general, both as an entrepreneur as an investor, and acknowledgment that a lot of luck is also needed, and that you do really need to always credit successes with a lot of luck in addition to hard work and also not look down on failures because so much of it could have been literally just luck.
(Photo by Sara)
Get my book, “Long Term Game: How to build a video games company” from Amazon. Available on Kindle, audiobook, and paperback. Check it out!
Asbjoern Malte Soendergaard — Games company builder story
In this week’s podcast episode, I’m talking with Asbjoern Malte Soendergaard, the founder and CEO of Tactile Games, who are based out of Copenhagen, Denmark, and are the makers of the hit game Lily’s Garden.
In this discussion, we talk about how company culture has developed at Tactile over the years, how new projects get started, and what kind of a role does celebrating success and failure play at Tactile.
Listen to the full episode by going here.
Some useful templates from EGD
- Board meeting agenda template
- Board meeting minutes template
- Cap table template
- Investor update template
- PC game sales projections template
- Stock option allocations
- 10 questions that gaming investors ask
- and more
Articles worth reading
+ Is SKAdNetwork 4.0 a turning point for mobile advertising — “It’s possible that Apple felt compelled to ignore rampant device fingerprinting precisely because SKAdNetwork could not support the measurement precision needed to grow app audiences through direct response marketing. Surely that fear is now attenuated.”
+ Is it a Ponzi? — “Has crypto built anything useful? Or is it just a myriad of Ponzi schemes with sophisticated grifters stealing money from hopeful newcomers? Depending on who you ask, Crypto could be the financial coming-of-Jesus moment. Or it could be a “venereal disease… below contempt” in the words of Charlie Munger.”
+ Book notes by Derek Sivers — “Everyone should read this book of little essays about listening. It teaches your ears to pay more attention. It calls your attention to sounds you hadn’t noticed. It’s beautifully written and makes your life better. I read it twice, 24 years ago, and reading it again this week, it was even better than I remembered.”
+ Battle Passes – Everything You Ought to Know — “Battle Passes were first introduced in Valve’s Dota 2 and Team Fortress 2 and later popularized by Fortnite (which still today holds one of the most advanced and constantly improving designs). But they’ve long since stopped being exclusive to mid-core, cosmetic-driven games and nowadays are present in a constantly growing amount of genres and games.”
Quote that I’ve been thinking about
“We overestimate what we can accomplish in a day, but underestimate what we can accomplish in a year.”
— Chris Guilleabeau
Sponsored by ZEBEDEE
By building infrastructure on top of the Bitcoin protocol, ZEBEDEE is creating interoperability between different developers and studios, allowing the entire games industry to share in the same open standard for sending and receiving value. Find out more!
If you’re enjoying EGD News, I’d love it if you shared it with a friend or two. You can send them here to sign up. I try to make it one of the best emails you get each week, and I hope you’re enjoying it.
I hope you have a great weekend!