The number one thing that smart people do wrong is that they overvalue optionality. Contrary to popular belief, you should put yourself in a small box and limit your options so that you are clear and focused.
Optionality usually leads to a worse outcome than focus.
Almost every smart person disagrees with me on this, but you should eliminate options.
Most super-smart people are doing the opposite: they are continually growing their options. Business school teaches you to open up options. Businesses that value optionality will start a few different products with the hope that one of the businesses will take off, or they’ll make multiple bets valuing portfolio theory over focus.
Having multiple strategies often means that a company isn’t investing enough in the most promising path. The best businesses are clearly focused and say “no” to almost everything. They deliberately cut off options, and they publicly declare that they will not go into business lines in the future (even when businesses are adjacent to their core market).
Focus is the act of eliminating options.
Eschew optionality and instead focus on the one thing you want to do really, really well. Create a strategy and execute on that strategy. Don’t A/B test. Instead, be deterministic about what path will work and follow that path. A CEO might be wrong about the path, or the business might not execute. But without a deterministic path, you are leaving yourself vulnerable to the focused entrepreneur.
“The difference between successful people and really successful people is that really successful people say ‘no’ to almost everything.”
– Warren Buffett
Choice is like junk food.
There’s a great article by Gary Basin called Choice is like junk food, where he compares his relationship with chocolate chip cookies to that of extensive choice. Basin writes:
“I have a complicated relationship with junk food, especially chocolate chip cookies 🍪. I love the idea of them. I love the initial taste. But, more often than not, I regret eating them.
When I’m presented with many options — when I need to make a choice — I get similar vibes. The idea of having a choice is exciting. It empowers me. I feel in control. The reality, however, is often paralysis. I may feel anxious, tired, or indifferent. I wish someone would just choose for me.”
He’s not the only one who feels that way. Basin presents a study from 2000 on an experiment carried out at a grocery store. Two tables were set up in the store where customers could taste different jams. One table had an extensive selection of jams, while the other table only had few options. Most people stopped at the table with the vast selection, but a larger percentage bought jams from the table with only a few choices. Here’s the experiment graphed:
These results tell us that a business is probably better off providing only a few products instead of a dozen. Optionality is bad for business. Instead, you should eschew optionality and focus on the one thing you do really, really well.
The fewer products you have, the fewer enemies you’ll make.
If you’re a small company, you want to minimize the number of enemies you have. And you do that by putting yourself in a box, doing fewer things, and telegraphing your plans to the market.
Try to pick something where you don’t have any competitors, to begin with. Avoid businesses with strong competition and create an entirely new category to compete in. That way, your “competitors” could become your allies, where you offer something they need, and they offer something you need.
By eliminating options, your customers (and competitors) know exactly what you do. And you should constantly reiterate this to anyone who will listen. You should tell your customers, employees, competitors, and investors what box you’ve put yourself in so they know why and when they should call you.
Marriage is the ultimate elimination of optionality in your personal life.
When you get married, you are eliminating optionality from your romantic life. And when marriage works, it is the single most fulfilling thing of our lives. The reason that works so well is that it forces you to focus on a critical relationship.
Your marriage is like your key product. It’s the most important thing you have. And it takes work and effort to keep it alive. It’s always fluid and changing, so you have to make decisions under uncertainty, without all the information you wish you had (you can’t see into another person’s mind). Then, you receive feedback and make adjustments accordingly, and the cycle continues over and over again.
Now, imagine not being married to one person but four different people. How could you possibly sustain the level of commitment and communication necessary to keep all four relationships working?
You can’t. That’s why you should marry your business to a single strategy.
It’s better to be great at one thing than good at many things.
I write about this in my article, To become a superstar, improve your strengths (not your faults). Here’s the key idea:
“To really differentiate yourself in this winner-take-all world, you should be focusing on improving your strengths, not your weaknesses… focus on one or two of the things at which you excel and hone those skills or talents to the point of excellence.”
It’s the same rule for business. If you want to win big, operate only in your area of extreme competence, and make that area as small as possible.
The world does not reward balance and diversification. Eschew optionality and focus on what your business does really, really well. That’s how you win big.
Special thanks to Thomas Waschenfelder for his help and edits.