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Positive Enterprise Value Blog First Principles: The One Strategy Decision for Owner-Managers?
First Principles: The One Strategy Decision for Owner-Managers?

First Principles: The One Strategy Decision for Owner-Managers?

December 7, 2016 — Ojai

Is your life exactly where you want it to be right now? No? Ahhhh, mine neither. What if we describe as colorfully and graphically as possible what we are trying to get our life to move towards, to become? Can we envision—and do we dare to—articulate exactly what we are trying to move toward in the world?

Humans seem to admire intelligence (especially in ourselves). While we know planets follow gravitational laws with 100% precision, don’t we also know that anything with human social interaction is inherently imprecise, not predictable? We all have various biases and illusions that are not aligned with objective reality. In fact, anyone who thinks for one minute that we are rational econs and not animal spirits driven almost completely by our instincts and emotions has not been paying attention. Studying past behavior is not predictive. The future is not knowable.

I accept that reality. Nevertheless, what we can do is model what ifs, and then plan for contingent action around those models. It seems to me intelligence is one of the core traits of Homo sapiens. One of intelligence’s main functions—perhaps the principal one—is to model various possibilities for the future: planning for what we hope we can act on, allocate our energy towards, or create rather than merely ruminating on what we fear or are missing out on.

Thinking prospectively challenges us to sketch a course (in pencil) from where we are to where we want to be literally or metaphorically, while being engaged in the present reality. Making mental models for “risky decisions” (risk infers calculable probability), “uncertain decisions” (uncertain infers unknowable probability), or outcomes is conceptual work and hard work. Not only that, but since most prospection is informed by our own subjective foundation of experience and learning, it compels us not only to consider various models, but also to dig deep into our scar tissue and apply our learning to those future based models.

Strategy is allocation of (finite) future resources, right? Reducing the problem to the most fundamental elements, to the first principles then, isn’t there really only one decision for owner-managers: Invest More, or Divest? That’s consistent whether we are thinking about our organizations, Enterprise Value, or allocating our personal energy. If we are not investing more, we’ve made a decision to divest. In that relationship. In our own fitness. In learning, and growing. That behavior, that habit, that goal. In the new not-for-profit startup, in your daughter’s education, in the VP of Sales. What happens if you consciously do not make this decision? The grey twilight of neglect is a form of divesting, too.

And yet, do you notice that many, maybe even the majority of people in the mass popular culture spend a lot of time thinking not about where they are trying to move towards, but about the past—coulda, shoulda, woulda. There can be some productive learnings from the past sure, but for most of us our wired-in negativity bias invites a lot of excessive ruminating, regret, and anxiety over actions taken or untaken.  I see this frequently among really bright successful people, and scratch my head and ask: why would you surrender your critical thinking bad assery to the crack cocaine of ruminating about the past—which you cannot influence?

Frequently it seems the more successful we are in our domain, the more we can fool ourselves, procrastinating on our decisions. It’s incredibly easy to get lost in the clutter of complexity in the lives we have created, preoccupied by “busy-ness,” pretending we’re too busy to spend the time. And by the way, how about we stop kidding ourselves by using the term “spending time”? We cannot “spend time” simply because we have no inventory of time which we decide to spend or not. Try not spending it. Time is clicking inexorably away and only in one direction. All we can do is purposefully allocate more of our energy (Invest More) to an activity, or Not (Divest).

The big anxiety generating machine we call today’s mass popular culture is not your friend in this exercise. It has conditioned you to accept only a very narrow vision of life, of your potential. Nature on the other hand, is a wildly free wonderland in which endless unlikely probabilities are constantly actualized. We have the extraordinary and magnificent ability to think prospectively and alter our behavior now to increase the probability of achieving our personal and professional goals in the future. So forget what the mass popular culture dictates, or you think you know. Learn what is possible by modeling and experimenting for yourself.

Will you reach your potential, what you want to become? Entrepreneur Owner-Managers’ striving for achievement is only meaningful insofar as it is possible to fail. Sustained achievement leading to flourishing requires us to make good strategy decisions. And the essential core strategic decision is reduced to this: Do you Invest More, or Divest?

I do not always love this question. But I sure as hell love why we ask the question, which keeps us focused on intentional resource allocation.


References and Further Reading:

Ariely, Dan. Payoff: The Hidden Logic that Shapes our Motivations. New York, NY: Simon & Schuster/TED Books. 2016. Print.
Buchanan, Leigh, and O’Connell, Andrew. A Brief History of Decision Making. Cambridge, MA: Harvard Business Review. 2006. Article.
Christensen, Clayton, M., Hall, Taddy, Dillon, Karen, Duncan, David, S. Competing Against Luck: The Story of Innovation and Customer Choice. New York, NY: Harper. 2016. Print.
Harari, Yuval Noah. Homo Deus: A Brief History of Tomorrow. Harvill Secker. 2016. In Pre-Release Galley.
Hawkins, Jeff, Blakeslee, Sandra. On Intelligence. New York, NY: Times Books, Henry Holt and Company, LLC. 2004. Print.
Kimball, Richard C. I believe Dick Kimball was the first person I ever heard say that there is only one strategy decision: Invest More or Divest Now in the 1980-1990 timeframe. Live discussions.
Lewis, Michael. The Undoing Project: A Friendship that Changed Our Lives. New York, NY: WW Norton. 2016. Pre-release print.
McKenna, Terrence. Psychedelic Thoughts. Seattle, WA: Amazon. 2016. Ebook.
Meadows, Donella. Thinking in Systems: A Primer. Essex Junction, Vermont: Chelsea Green Publishing. 2008. Print.
Pressfield, Steven. The War of Art. New York, NY: Black Irish Entertainment. 2002. Print.
Seligman, Martin, E.P., Railton, Peter, Baumeister, Roy, F., Sripada, Chandra. Homo Prospectus. New York, NY: Oxford University Press. 2016. Print.
Tajfel, Henri. Human Groups and Social Categories: Studies in Social Psychology. Cambridge, UK: Cambridge University Press. 1981. Print.

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