Tag Archives: Efficiency

We are often faced with this choice with how we spend our money: spend some now for immediate enjoyment, or spend more, later, to get something bigger and better.

In business, this is quantified by NPV – a calculation that says that a dollar today is worth more than a dollar next year because you can do something value-adding with a dollar if you can use it for longer.  It allows you to compare different rewards given at different times to see which is optimal.  For example, it lets you decide whether to accept a lump sum, or an annuity if you win the lottery.

We make these choices all the time – we don’t eat cup ramen for every meal.  However, without a sense of what each expense represents as a trade-off, we can’t make informed decisions.  A $5 / day Starbucks habit costs $1250 (work week), but one year’s expense will compound to more than $2000 in 5 years, $3300 in 10 and $8700 in 20 years (assuming a 7% rate of return and 3% inflation).

The key is to make sure expenditures are meaningful and rewarding in the present, else it is better to defer in order to have a greater range of choices in the future.

The idea of deferred gratification being superior to immediate pleasure has been part of our culture since long before the Stanford Marshmallow Experiment validated it.  The simple idea of foregoing an immediate reward for a later gain is a foundation of modern religions, and correlates to greater success in many life measures.

The counter to this approach is summed up in the expression “a bird in the hand is worth one in the bush”, or the sports analogy “getting points on the board”.  This approach notices that deferred gratification doesn’t mean much if the gratification never arrives.

At its core, the question is one of time horizons – how long a game are you playing.  The optimal choice changes depending on whether you care about the moment, the week or the next ten years.  Assuming that deferring is always better is as foolish as pure hedonism.

A balance is needed – all immediate reward and you eat your seed corn; all deferred and you will forget how to enjoy what you’re doing and why you’re doing it.

Establishing a consistent core set of principles from which your actions flow is the single most important thing you can do to drive clarity of intent and action across all phases of professional and personal life.

Clear articulation of principles is most valuable in ambiguous and new situations, providing a starting point from which to respond.  It also has the value of being consistent with your prior set of actions, making it more readily processed by your stakeholders.

This applies to:

  • Organizational: This is the core strength of an explicit principled approach, especially for organizations and initiatives that span multiple functional or management groups.  It drives internal alignment, agility and the ability to speak with one voice.
  • Professional: This is the core of your Personal Brand and should never be compromised.  It drives signal consistency and is the foundation of your message when interviewing for jobs.
  • Personal:  This is often the hardest to define.  Personal principles are typically so polished by years of experience and nuance that they are hard to distinguish.  However, it can be an enlightening exercise to explore your core principles and what they imply.  I like StrengthsFinder, amongst the host of self-help systems.

This seems pretty apropos for a first topic for this blog: Value of Test & Learn.

"Test & Learn" is popular in industry these days due to the expectation that it will help individuals and organizations achieve their goals. However, as with most new things, it becomes empty vessel into which hopes, dreams and aspirations are poured.

What it is:

Test & Learn is merely a process of continual course correction, a belief that it is worth my time to ask questions and incorporate the response throughout my creative process, not just when I'm done. It is a departure from traditional problem solving, where experts take a question back to their desks, then return with a polished, thought-out solution.

Test & learn seeks to create minimal viable prototypes - those that capture only the key features necessary to answer the question - and does not waste time polishing ancillary elements. These are refined over multiple iterations, converging on a set of design criteria and a solution.

Test & Learn provides greater confidence that the correct conclusion has been reached, because a number of preceding iterations have been tested with the target audience, retaining the positive elements, while removing the negative.

Net: Test & Learn lowers the risk of failure upon market introduction, mitigating the risk of catastrophic throwaway costs (marketing spend, inventory build, capital investment, etc)

When to use:

Whenever you're venturing into the unknown.  At the very least, it will help you sleep better at night, knowing that your approach has been validated.

Things to watch out for:

In my experience, Test & Learn is looked to as the magic bullet to solve long-standing development problems:

  • Shorten development time ("Test & Learn speeds learning, so I can get done faster!")
  • Decrease resource burn ("Test & Learn lets the market do my work for me!")
  • Remove need to develop expertise ("Test & Learn uses the market as my expert set")

Sadly, while these sometimes occur, they are not the core benefit. The sources of failure for the above hopes are readily apparent:

  • I will shorten development time: pulsing the market for feedback takes time, and you probably won't recoup that relative to a traditional process
  • I will decrease resource burn: the work still needs to get done
  • I'll remove the need to develop expertise: removing negative elements in each successive prototype requires expertise in the relevant disciplines