Rich Kids Take 2.5x More Risks in Business. Get Higher Chance to Succeed.

I have always tried to look into the role money plays in entrepreneurship, maybe in order to understand my complex family history. I was certain, that money had a big role, i experienced it myself when the cost was not an issue VS when it was. However the numbers and the data lacked, i did not have neither the statistical data to prove this, nor a quantifiable difference to point to. Now i have, thanks’ to Mark Rober.

I am a big fan of Mark Rober, an entrepreneurial NASA ex-engineer that creates educational youtube videos. Mark had the opportunity to give a commencement speech at MIT. The speech was inspirational (i do have some reservations though), however what interests me the most, is the not the speech itself, it is a small social experiment Mark did. The mario effect as he calls it, was previously explained in a tedx talk which i didn’t watch .

The experiment about spending:

Mark ran an experiment. He had 50,000 participants attempt to solve a computer programming puzzle.

He created two versions of the challenge:
In the first version, if participants weren’t successful, they got this message: “That didn’t work. Please try again.”
In the second version, if participants weren’t successful, they got this message: “That didn’t work. You lost 5 points. You now have 195 points. Please try again”

The Results of the experiment are chocking to say the least:
Those who lost points for failed attempts, had a success rate of 52%.
Those who didn’t lose points for failed attempts, had a success rate of 68%.
This 16% difference is significant, but it is not important to us, as it related to solving a specific puzzle.
What’s important however: is that those who didn’t lose points made 2.5 times *more attempts* to solve the puzzle.
To rephrase it, introducing points triggers in you a mechanism of risking vs preserving. The lack of points can be assimilated to a state of being insensitive to points. Being insensitive to points allows you to take 2.5x more attempts, or 250% attempts.

Takeaway from this experiment:
When mistakes do not penalize you, you are more likely to keep trying. And if you keep trying, you have more chances of eventually succeeding.

Now let’s apply it to entrepreneurship:

Points is money in this case, as we all know that money is at the centre of entrepreneurship. Losing points is like losing money. Being sensitive to losing money makes you take less risks. Being insensitive to losing money makes you take more risks. How much more ? 2.5 times more.

Most rich kids, through upbringing are made insensitive to losing money in “small” sums. Hence even if we do not factor the many factors that come into play to help make a venture successful (like investment money, network, connections, etc …), they will have a 2.5x times more tries than your average middle-class joe.

PS: Some people naively, or intentionally try to frame the main difference in level of entrepreneurship, to origin, gender, race etc … I even have an acquaintance who got a PHD degree on such an illogical thesis (manipulating his tiny data set to fit his needs 🤣). To those people i can finally say, nothing other than money matters, and the data is here to prove it.

Share if you care

Abdallah Alaili

I'm a serial entrepreneur (mostly tech) and micro-investor (tiny), this is a blog to learn from other entrepreneurs and spread the wisdom to many more. You can find me on: Instagram - Twitter - Linkedin - more about me