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In my Stanford GSB Exec Education finance class, Ilya Strebulaev claimed he’d teach us half of what we needed to know about M&A in the first 15 minutes. The rest would take the entire course. He started with a demonstration involving a sealed piggy bank full of pennies. He gave us its dimensions and let us hold and weigh it. Our goal was to estimate the dollar value of the pennies. The highest bid would win, but there was a twist: if the bid matched the actual dollar value, the bidder would keep the piggy bank. If the bid was higher, Ilya would keep the money. I won with a $110 bid. The actual value? Just $11.87.
Ilya, probably feeling sorry for me, chose not to take the money. Instead, he asked me to donate it to a charity of my choice; GirlsWhoCode was the ultimate beneficiary.
In those first 15 minutes, he taught us about the Winner’s Curse, showing how, in a competitive bidding situation without complete information, the highest bidder invariably overpays. We spent the rest of the course learning how to model incomplete information.
Ilya discusses the Winner’s Curse and the piggy bank case at length in Chapter 4, “Say No 100 Times,” of his latest book co-authored with Alex Dang.
If capital allocation is the core duty of a business leader, making informed bets is akin to venture investing. For this reason, his book is essential reading for anyone with profit and loss responsibility.
In this edition of My Best Advice, Ilya shares the guidance he believes is most crucial for today’s leaders.
Editor’s note: This is the seventeenth in a series of guest posts where people from all walks of life share their best advice in times like these. A big thanks to the leaders who volunteered to share their life experiences. Reflection on the past is a deeply personal exercise. The willingness to share it with the world, especially in the written form, is a commendable act of vulnerability. For this alone, they have my deepest gratitude.
My Best Advice
Ilya encourages leaders to be venture minded:
“Be venture minded. Serendipity matters but you have to be prepared for serendipity. Make sure by following the venture mindset principles that serendipity will not bypass you!”
The principles from his book The Venture Mindset: How to Make Smarter Bets and Achieve Extraordinary Growth are listed below:
