twointwomillion
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Let’s take two founders, Kate and Max.
To control all variables, let’s suppose both have the same 100% resources, so pretend we’re copy-pasting earth and are analyzing the same situation in two parallel universes.
This is actually pretty interesting to think about in ergodicity from the ensemble perspective which is a way to remove noise when you’re analyzing a system by averaging. More on ergodicity here in How Our Physics Envy Results In False Confidence In Our Organizations, but I’ll try to stay on topic today haha.
Kate examines the future product roadmap and notices that 30% is obnoxiously good and 70% is pretty good.
Subconsciously she believes it’s best to diversify to attract more customers.
Max also examines the future product roadmap.
He notices that 30% is incredible. But he thinks that pretty good is just not good enough. He believes that it’s better for the company to focus all of its resources on the 30% that’s incredible and just axe the 70% altogether.
Who’s more likely to succeed?
Business is not an exact science, more on that here: The Art Of Business, Where Science And Business Depart, but chances are that Max will do better. [1]
If a startup focusses all its resources on the 30% incredible part and has the courage to bin the rest, they can focus the same quantity of resources on fewer things so it’ll be easier to do a better job. [2]
You can burn 8 holes in a piece of paper sequentially, but if you try to do it in parallel, you run the risk of the light beam being too diffused to have enough energy to burn even a single hole.
Most founders focus on too many things before they have 1 thing that’s working really well. [3]
Double down on the stuff that’s truly great.
A natural question is how do I know what’s great? Part of that is your vision for the future but ultimately it’s up to your users. More on that in: Do You Have Customers Who Deeply Love You?
It seems like basic advice but it’s hard to internalize: Focus on the few things that are awesome and be willing to bin that which is merely great.
NOTES
[1] In Mathematics, 1 counterexample disproves the conjecture. Euler’s sum of powers conjecture (if a sum of nth powers is an nth power, then the sum has at least n terms) was proposed by Euler in 1769. A counterexample for k=5 was found 2 centuries later. (My favorite part is that the paper disproving it is just 2 sentences. In a world of academia where emotion is frowned upon, you gotta find another way to flex!) But in business, an exception does not disprove the rule. That’s because we’re not looking for absolute truths but rather useful principles. That’s why it’s so unproductive when people make the argument: ‘What about startup X?!’, while true, it’s also unilluminating. There was a Stanford entrepreneurship Professor (blanking on who) that didn’t allow his students to use examples to prove or disprove, but wanted them to use principles as arguments to force them to think.
[2] It’s important to keep in mind comparative vs. absolute advantage. The company that’s best at something has the absolute advantage. So if company K is the best by a massive margin at producing OLED screens, they have the absolute advantage. A comparative advantage is when a company can produce something at a lower cost than anyone else. Suppose company K is also the best by a tiny margin at producing LCD screens. Suppose that the OLED business is also much more lucrative, could company K produce LCD screens at a lower cost than the competition? No. Because you need to take opportunity cost into account. Time spent on LCD screens is time not spent on OLED screens. It’ll be better for the economy if company K produces OLEDs and another company the LCDs even though K is better at both than anyone else. If the opportunity cost is too high, it’s likely better to let someone else that has the comparative advantage do it. The idea of analyzing by opportunity cost instead of absolute advantage was created by David Ricardo.
[3] This can be a way of hiding. Instead of committing to something you try to do everything so you never have to make the painful choice of cutting something.
----
Hope you enjoyed this piece! Perhaps I can bamboozle you into joining my newsletter here.
RJ
To control all variables, let’s suppose both have the same 100% resources, so pretend we’re copy-pasting earth and are analyzing the same situation in two parallel universes.
This is actually pretty interesting to think about in ergodicity from the ensemble perspective which is a way to remove noise when you’re analyzing a system by averaging. More on ergodicity here in How Our Physics Envy Results In False Confidence In Our Organizations, but I’ll try to stay on topic today haha.
Kate examines the future product roadmap and notices that 30% is obnoxiously good and 70% is pretty good.
Subconsciously she believes it’s best to diversify to attract more customers.
Max also examines the future product roadmap.
He notices that 30% is incredible. But he thinks that pretty good is just not good enough. He believes that it’s better for the company to focus all of its resources on the 30% that’s incredible and just axe the 70% altogether.
Who’s more likely to succeed?
Business is not an exact science, more on that here: The Art Of Business, Where Science And Business Depart, but chances are that Max will do better. [1]
If a startup focusses all its resources on the 30% incredible part and has the courage to bin the rest, they can focus the same quantity of resources on fewer things so it’ll be easier to do a better job. [2]
You can burn 8 holes in a piece of paper sequentially, but if you try to do it in parallel, you run the risk of the light beam being too diffused to have enough energy to burn even a single hole.
Most founders focus on too many things before they have 1 thing that’s working really well. [3]
Double down on the stuff that’s truly great.
A natural question is how do I know what’s great? Part of that is your vision for the future but ultimately it’s up to your users. More on that in: Do You Have Customers Who Deeply Love You?
It seems like basic advice but it’s hard to internalize: Focus on the few things that are awesome and be willing to bin that which is merely great.
NOTES
[1] In Mathematics, 1 counterexample disproves the conjecture. Euler’s sum of powers conjecture (if a sum of nth powers is an nth power, then the sum has at least n terms) was proposed by Euler in 1769. A counterexample for k=5 was found 2 centuries later. (My favorite part is that the paper disproving it is just 2 sentences. In a world of academia where emotion is frowned upon, you gotta find another way to flex!) But in business, an exception does not disprove the rule. That’s because we’re not looking for absolute truths but rather useful principles. That’s why it’s so unproductive when people make the argument: ‘What about startup X?!’, while true, it’s also unilluminating. There was a Stanford entrepreneurship Professor (blanking on who) that didn’t allow his students to use examples to prove or disprove, but wanted them to use principles as arguments to force them to think.
[2] It’s important to keep in mind comparative vs. absolute advantage. The company that’s best at something has the absolute advantage. So if company K is the best by a massive margin at producing OLED screens, they have the absolute advantage. A comparative advantage is when a company can produce something at a lower cost than anyone else. Suppose company K is also the best by a tiny margin at producing LCD screens. Suppose that the OLED business is also much more lucrative, could company K produce LCD screens at a lower cost than the competition? No. Because you need to take opportunity cost into account. Time spent on LCD screens is time not spent on OLED screens. It’ll be better for the economy if company K produces OLEDs and another company the LCDs even though K is better at both than anyone else. If the opportunity cost is too high, it’s likely better to let someone else that has the comparative advantage do it. The idea of analyzing by opportunity cost instead of absolute advantage was created by David Ricardo.
[3] This can be a way of hiding. Instead of committing to something you try to do everything so you never have to make the painful choice of cutting something.
----
Hope you enjoyed this piece! Perhaps I can bamboozle you into joining my newsletter here.
RJ