Why the MIT Blackjack Team Became Entrepreneurs

An anonymous reader writes "The MIT Blackjack Team, made famous by the book 'Bringing Down the House' and the movie '21,' learned important lessons about running a business when they were beating casinos in the '80s and '90s. Key members of the team went on to start influential tech companies like SolidWorks and Stanza and invest in startups. Why did they do that instead of becoming, say, hedge fund managers? MIT entrepreneurship leader Bill Aulet moderated a team reunion panel in Boston, and he writes that the themes that carry over from blackjack to startups include staying disciplined, playing for the long term, and not taking unnecessary risks. And, of course, disrupting the powers that be."

Comments

Because they had the money to become entrepreneurs

[MarvinMouse]

That is what is really the reason, in my opinion. They made enough off of their BJ work that they could afford to take high level risks without losing their house (literally) and they didn't need investors so they would own all of the rights to their products.

There are tons of people who are great programmers or have good ideas that don't bother because they need to work day-to-day to pay their bills and make sure their family has food on the table.

Re:Because they had the money to become entreprene

[SirGarlon]

Apologies for drifting off-topic, but my perception of risk is very different from yours.

All you stand to lose is the money you paid yourself while developing the software for a year or two.

You stand to lose a good deal more than that. You stand to lose:

1. The salary you paid yourself and your staff
2. All the overhead expenses, such as your lease on office space, insurance, the computers you develop software on, and all the professional services you'll need: accounting, legal consultation, etc.
3. The salary you are NOT EARNING while throwing your money into a failing pit
4. The dividends you are NOT EARNING from your initial capital, which could be making money in a safer investment instead of losing money

So the risk equation you're looking at is that you stand to lose at least double the salary you pay yourself (what you lose, and what you give up as opportunity cost) and probably a good 50% overhead on top of that on the downside. The upside is effectively unlimited (see Google, Facebook) but the chance of failure is pretty high. I leave it as an exercise to the reader to research the failure rate of tech startups.

An alternative is a pretty reliable 10% annual return through run-of-the-mill stock investments.

My rule of thumb is, if the ROI is not better than you would get from an index mutual fund, then you should either be getting substantial non-financial rewards (doing what you love, feeling that you are making the world a better place, etc.), or you should liquidate everything and invest to get the reliable dividends you can't produce for yourself.