Serendipity & network effects

Over the last few days I've been negotiating a very large deal. It's not an average "freelance prospect"—it's an equity partnership with a company whose founder I deeply respect, and whose potential (I think) is in the 8 or even 9-figure range.

Should this deal succeed, and should I achieve the follow through I'm hoping for, it'll be stupidly high-ROI. Many millions of dollars. Because of this, I've moved around a lot of other obligations in my life to accommodate. I've slept less, journaled less, and been less active with most of my personal/professional relationships.

The way I conceptualize deals like this:

• Maybe a 20% chance of making it work.
• If they do, they may be worth $5M.
• Expected value to me is thus $5M x 20% = $1M.

If you found $1M locked in a chest in front of you, what would you be willing to do to open it? Would you be be fine committing a few sleepless nights? Or a couple of weeks of stressful back-and-forth? Of course!

Even one hundred hours of your time would yield an expected benefit of $10,000/hr. Like I mentioned in my last post, there are very few things available to most people that can drive that sort of return, so I feel comfortable committing my time and personal resources to this.

Serendipity in business

Anyway, what draws me to journalling today? Because of how serendipitous all of this has been. In contrast to most of my other leads, which were achieved through consistent, direct effort, this deal was almost entirely indirect.

I spent $0 in marketing. 0 sales calls. It was all through connections, happenstance, and being in the right place at the right time.

Some might call it serendipity.

That's what I want to talk about now. Serendipitous deals—or "moonshot" deals, as many people call them—are elusive. And for good reason: they're high-stakes, often make their participants extremely rich, and are the sorts of events movies, biographies, and media focus on.

But it's not all luck. There are certain actions you can take to improve the likelihood of serendipity in your life and tilt the scales in your favor. And I've found great success with one of them: just meet more people!

Network effects

Two important facts about people:

• The average American knows 20 people reasonably closely, and another 580 by name. America isn't necessarily representative of the whole world, but it's OK for our purposes (business/economics).
• Your age, status, occupation, and net worth are highly correlated with your friends.

In practice, those two points mean that, if you're rich, you probably have ~20 friends who are also rich. Or at least wealthier than average. If you're a business owner, or really smart, or have some valuable quality, a similar thing applies—you probably know ~20 people who possess the same traits.

Base rates

Logically, each of us have some base rate of serendipity. Think of this as your "luck" stat—you might have a 0.001% chance of winning the lottery, for instance, or of finding $100M on the floor, or of building a world-changing, industry defining business.

Here's why meeting people is so great, then. Because people's net worths, life happinesses, etc are correlated, every time you meet someone new, you multiply your base rate.

If you befriend a thousand people, and each of them have a base rate of 0.001%, the odds that one of them will become wildly successful go up to 1%! And if one of your friends becomes successful, there's a much higher likelihood that you will, since people tend to correlate with the friends they keep.

No way!

Before anybody gets angry at me, of course correlation =!= causation. You're not going to become a multibillionaire simply because you know someone who is a multibillionaire.

But you'd be silly to think it doesn't matter! People enjoy providing opportunities to other people. One extremely successful person significantly improves the value of the rest of the network.

Case in point: I can't tell you the number of fantastic connections I've made simply by virtue of introducing myself to a single person at an event or a business meeting. In many cases, that one person opens up a whole new tree of social connections, many of which end up changing my life, both in business and in other areas of my life.

My current business deal is no exception: I only met the founder because I consciously chose to shake someone's hand at a random event in downtown Vancouver. He introduced me to another friend, who introduced me to another friend... you get the point.

It is impossible to know the value of this looking forward. You only see it when you look backward. So to minimize regret later on in life, and to improve your base rate of serendipity, you should make meeting people a conscious and active part of your daily regimen.

Closing

TLDR: meet more people. If you previously weighted the value of adding one more person to your network at X, it's probably more accurate to weight it at 20x. 20x is probably >> the subjective cost (time, money, energy) it'd take you to do this, so logically you should!

I know many of us now work remotely. Try booking a single additional call per week—even someone you may not necessarily think you have shared interests with, or see an entrepreneurial opportunity with. If you do this every week, that's ~52x20 = ~1,000 additional doors opened per year. And some of them will certainly pay off.

Perhaps more importantly, it's fun!