The most successful founders and CEOs say NO more than everyone else. How does that work?
Doesn’t having a bigger business allow you to say YES more often?
You’d think so, but it doesn’t work that way.
Experienced entrepreneurs, big business leaders, and successful people think a lot more about OPPORTUNITY COSTS than everyone else.
The opportunity cost of what they don’t get if they say YES to something.
They simply have a very high bar for how they choose to spend their finite time, resources, and money.
This isn’t so obvious from the outside.
They don’t explain their opportunity cost theory to us. They just say No and move on.
Here are a few examples of opportunity costs for startup founders:
- You have 100 good ideas for your product, marketing, or business. Inexperienced founders will try to do as many as they can with the same amount of attention.Experienced founders will test the 10 best ideas to find the 2-3 biggest ideas that will have more impact than all the others.Why waste the next 5-10 years of your life on something that isn’t the best for you? That’s opportunity cost.
- Experienced VCs and angels see hundreds of companies a year but they invest in only a few. They know they can only invest in 20 or so companies every few years.Every company they invest in prevents them from investing in something else that could be better. So every startup founder chasing investment is really competing with all the other companies the investors have seen.
- Every big and successful company could do a lot of things, but they focus on a few things and say NO to the rest. Steve Jobs was a master of this.They know that saying YES to something means not doing something else. There’s a very high bar to what they say yes to.Author Jim Collins describes it as “Good is the enemy of great.” It’s not enough that it’s a good idea that will work. There are millions of those.
It has to be one of the FINITE FEW ideas or investments that will work better than any of the others.
- At some point, founders realize that when they spend all of their time and attention on their business for years and years, they didn’t get to do things that were important.Things like time with family, health, hobbies, and travel. The opportunity costs can be very high.
- What does an employee give up to drive an hour each way to work to sit in your office?
- Was having the big house and the fancy car really worth working 60+ hours a week for all those years?
Successful people and bigger companies say NO more often because they have 10X more choices, but not twice as much time or attention.
Opportunity cost is simply perceived future regret.
It’s hard to learn what’s most important and say NO to good ideas that aren’t great enough–before you do them.
That’s how I see it. How do you see opportunity costs?
#practicalfounders.
