The Entrepreneur vs. The Strategy Consultant

Overly simplified view, but I like this description of the differences between an entrepreneur and a consultant.

A typical strategy consultant job interview might go something like this:

“I toss a coin. Heads you win $10,000. Tails you lose $6,000. Do you play this game? Why?”

And a typical strategy consultant answer would go something like this:

50% chance I win, 50% chance I lose. So my decision calculation goes something like:

Winnings: (0.5) * $10,000 = $5,000E
Loses: (0.5) * $6,000 = $3,000

My net value of this game is $2,000. Therefore, even if I am very risk averse, I’ll still play this game, because I can afford to lose $6K when the payoff is so much higher.

A typical entrepreneur would look at this game totally differently and would ask a series of questions:

  • How do I know the coin is fair? Maybe tails is much more likely to come up. Can I test the coin by flipping it 500 times to see if it is consistent? Do I really want to waste my time performing and recording 500 coin tosses?
  • How do taxes affect my wins and losses? Is Uncle Sam going to take a huge chunk of my winnings but not recognize my losses? Can I only apply my losses to gambling gains? How are state and city taxes affected?
  • Do I have to pay in cash if I lose and do I get cash if I win? If that is the case, are we going to show up at the location with all the money? Will I be secure? Can I pay by credit card to get frequent flyer miles?
  • How can I be sure I will collect from you? Are we going to hold the money in a third-party escrow? How much will that cost?