Why We Evangelise Bootstrapping

Based on Nassim Taleb's Skin in the Game

Nassim has ideas on just about everything. But one of his best is definitely the heart of his book, Skin in the Game.

There’s a great non-obvious lesson for any founder in this concept; namely, why we root for bootstrappers (and how to use the psychology of it - whether you’re bootstrapped or not).

Basics: “Skin in the game” is the idea that we make better decisions when we’re responsible for the consequences.

It’s like high-speed driving - if you drive dangerously, you’re likely to kill yourself as well as others. So we trust that most people won’t do it.

The act of risk sharing acts as a filter. It’s a naturally occurring risk management system. So we take the risk.

Systems learn at the collective level by the mechanism of selection.

Nassim Taleb

How It Works: According to Nassim, “expertise is scale dependent.”

At a small scale, a person’s skill is more visible. It’s easier to judge if a plumber is good at their job than a politician. And if a plumber is bad, they’ll lose work - so there’s an inbuilt incentive to do well.

Back to Bootstrapping

Bootstrappers are inherently more invested in their companies than VC-backed founders. We trust them more because they’re owning their own risk.

It’s a big part of why we want to root for them.

But how does knowing that help?

Controlling the Narrative: Understanding our natural biases is marketing 101. Thinking about public perception from day 1 can be a huge advantage.

Big companies do a version of this all the time: acting smaller than they are. Because they know consumers are wired to root for the underdog.

Take Walmart’s acquisition of startups like Bonobos, for example. Or the new “Market @ Macy’s” initiative. They mimic the qualities of small businesses that make them seem more reliable.

They change the narrative.

The Takeaway

Understanding the consumer psychology of bootstrapping is essential to controlling the narrative. And showing you have skin in the game is the best way to act on it.

Risk and trust are two sides of the same coin.

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