I played with the rather unconventional thought of viewing life choices through the mindset of startup investors and bankers. Looking at the difference in risk-taking and potential outcomes of these investment strategies, are there any learnings we can apply to our personal lives? Can we think like a banker if our desired result is that of a startup investor?

Banker mentality focuses on minimizing risk, “preserving capital,” and what many would call a “playing it safe” or “playing not to lose” mentality. I call it “Banker Mentality” because when banks lend someone money, their upside tends to be limited (with relatively low interest rates), and their priority is to ensure they get their money back.

This approach also follows conventional choices, as when the road is well traveled, the perception is that a lot of risk is well known.

The “returns” of such a strategy though are rarely outstanding, you will unlikely 100x your capital by investing in treasuries and AAA bonds, and you also will also unlikely to make the largest difference in your field if you avoid risky choices.

Because such a mentality avoids failure, when it happens they may be affected hard.

Another challenge with “Banker Mentality” is – that we’re going through a period of tremendous change when it comes to politics, international relationships, and of course AI, so what was a very safe choice yesterday… may not be such tomorrow any longer. As someone through lived through the collapse of the Soviet Union I’ve seen firsthand how quickly unthinkable changes can really happen.

Startup Investor Mentality is the opposite, kind of, rather than prioritizing the return of the capital, you prioritize diversification (investing in multiple startups) and the chance of outsized return. For example, one startup investor described their philosophy that 10% of startups they invest in provide 25x return… whereas the other 90% fail or go nowhere – barely returning the capital.

Startup Investor Mentality also means “playing to win”, often going “against the status quo” and picking the road less traveled.

Startup Investor Mentality also deals see failure differently. They like saying “You Win or you Learn” and often expect to fail a lot, making them a lot more resilient. They also tend to think that if you’re not failing in anything you’re not taking enough risks, which are required for greatness.

At the same time, this mentality requires managing failure well – to decide when to persevere and when to give up (or “pivot”) and to fail fast – keeping the cost of failures small from a time and money prospective. 

Think about how “startup investing” works – A company tends to start by raising a little bit of money to reach early-stage success, when larger and larger rounds as it progresses, meaning at the early stage when risks are highest the capital loss is limited.

While it works in investing it is harder to apply in Personal and Professional life – most of us can’t have 10 life partners in parallel or 10 different careers. Yet there is a lot that can be applied too.

For example “trying out” the career you considering early or cutting your losses quickly if it ends up not working for you is a good option.

I also always recommend making sure you put yourself in a position to have options with different companies, industries, and geographical locations. Investing in building your personal brand and investing in networking and people skills (this is especially valuable for folks from the tech industry, where so many focus on their technical skills alone)

While being an entrepreneur is not for everyone, I think this path gives the most flexibility, and something possible to do part-time with your main job to get started.

In the end with enough “diversification” and many “high-risk” bets during your life, you have a high probability of achieving great outcomes in your life and probably have much more “fun” along the way too.

While it may look like the choice between these approaches is “either-or”, it is not. Nassim Taleb has suggested, what he calls “Barbell strategy” where you mix high risk with low risk for optimal outcome. This may mean having some of your capital in low-risk investments such as treasury bonds and index funds and some in highly speculative investments with the potential for great risk.

The same can also be applied to the career – you can keep a safe job while trying to build your first startup on the side, while risks are especially high.

I particularly like this approach to capital allocation to different passive investments, as their performance tends to depend on your emotional attachment.

When I started Percona, though, I put myself in a situation where I had no choice but to succeed. Staring into the abyss brings me the energy to do whatever is needed for success, though I also know many people who find fear paralyzing.

While I do not pretend to know the optimal way of thinking in every situation, I think it is great to stop and think about how you’re approaching the situation and whether it is indeed the optimal way. Way too often, we just follow the inertia of our minds, which can easily lead us astray.

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