Business As Sudoku

Malcolm Gladwell’s “The Sure Thing” (The New Yorker, 1/18/10) suggests that many business icons are substantially more risk averse than popular myth recalls. Gladwell gives several examples of what he means and then talks about business opportunities as a problem to be solved. Although I don’t think this was the point of his article, he’s got me thinking about business not as a collection of risks and probabilities but as a sudoku puzzle.

Sudoku is a great game. I don’t play it every day but each time I pick it up I remember why I like it. It has clear rules which — when combined with logic — make each move something I’m 100% confident in. I don’t guess in sudoku. I don’t have to. Each move builds on the last until your board is complete.

What Gladwell suggests — he adapts from another work, From Predators to Icons: Exposing the Myth of the Business Hero, which I haven’t read yet — is that the most successful entrepreneurs treat their businesses more like sudoku. They understand their playing field, they understand their position on it, and then they look for the next move that has the highest payoff and the least risk.

There’s more to the article than that, and I suspect there’s more to the original work than that, but this is what it’s got me thinking about. If you own a business, and you’re taking big risks that keep you up at night, maybe you’re doing it wrong. Perhaps you’re missing something in the market or possibly something in your assumptions is too far away from reality (either too rosy or too gloomy). Or perhaps you’ve missed some way of analyzing the situation.

I’m glad to have run across the article, both for the sudoku related thinking it spurred and for the profile of John Paulson. Paulson, a hedge fund manager, looked at the mortgage market and saw both the bubble and a way to capitalize on it’s burst: credit default swaps. In 2007, if the article is right, he personally pocketed $5 billion based on these. Wow. Gladwell includes a quote attributed to one of Paulson’s mentors, Marty Gruss: “Watch the downside; the upside will take care of itself.”

Interesting stuff and good advice.