One small side bet per quarter outperforms most “main” strategies. Counterintuitive, durable, true. Across every venture I’ve built, the side bets compounded into the most valuable parts of the portfolio. Here’s why and how to structure them.

What I mean by side bet

A small, capped-risk experiment outside your main thesis. Not a distraction — a deliberately scoped, deliberately small wager on something adjacent. Low money, low time, asymmetric upside. The bet costs you 10 hours and $500; the upside, if it works, is real.

Why side bets compound

Three structural reasons:

  1. Optionality. Your main strategy assumes a future. Side bets are calls on alternative futures. When the future surprises you (it always does), the side bets that landed give you ramp.
  2. Cross-pollination. What you learn in a side bet feeds the main work. Some of my best music decisions came from running L&O’s design process; some of my best product decisions came from voice work.
  3. Network effects of curiosity. The conversations and relationships side bets generate are non-fungible. They open doors the main strategy couldn’t.

The structure

Three rules I run on:

  • Cap the cost. No side bet costs more than 10 hours and $1,000 to test. If it needs more, it’s not a side bet — it’s a new venture.
  • Define the kill criterion before starting. “If by week 6 nothing has happened, I shut it down.”
  • One at a time. Multiple parallel side bets become attention-fragmenting noise.

Examples from my own portfolio

  • The first MCP server we shipped at MLO started as a side bet — “let’s see if this protocol matters.” Turned into a real product line.
  • L&O’s first capsule drop was a side bet — small batch, friends-and-family pricing. The brand grew out of the side-bet drop, not a planned launch.
  • This blog is a side bet against my main creative work. Long-form essays aren’t strategy; they’re curiosity. They’ve generated more inbound business than any other channel.

What kills side bets

Three failure modes:

  1. Underfunding emotionally. Treating it as throwaway. The bet needs to be small but real, attended to.
  2. Overfunding. Letting the side bet quietly bloat into a 200-hour project. Discipline the cap.
  3. Sentimental attachment to dead bets. When the kill criterion hits, kill it. Hope is not a strategy.

The annual math

Four side bets a year. Maybe one lands. The one that lands compounds for the next decade. The math is asymmetric in your favour even if the hit rate is 25%. Most knowledge workers don’t run any deliberate side bets and wonder why their careers feel deterministic.

The principle

Most people place all their chips on the main strategy. The compounding outcome over a decade comes from the small bets they almost didn’t make. Side bets are how the future gets in.

Running side bets and want to compare? Send me yours.