If you read the personal development literature, you might think that the secret to success is to focus on a single project and concentrate 100% of your efforts on it.
You will come across recommendations to focus on essentials, focus on your core skill set, focus on your strengths and delegate the rest.
If you’re a business owner, the same experts suggest that you should focus on your core business and let go of the rest. Some business coaches, like Dan Peña, recommend riding your horse to death, meaning to stick to a business until it dies off, milking your cash cow to death.
There’s a truth to that advice, but what if your project or your business becomes irrelevant in the market place?
Too Much Focus?
You might have heard the story of a professional who has ten years of work experience but can’t find a new job; or the businesses who were success stories for a long time, but suddenly failed, for example Kodak and Blackberry.
Why can’t a professional with ten years of work experience find a job? When you take a closer look at their career, you will see that they don’t have ten years of work experience. They have one year of work experience repeated ten times.
In other words, they were focused too much, too long on a narrow skill set, until it became irrelevant.
If you’re old enough to have used analogue cameras, you would know that for every 36 pictures you took, you needed to buy a roll of film by Kodak or other manufacturers. That was great business for Kodak back in the day. That is until digital cameras made it to the mainstream.
Back in the day, Blackberry smartphones with their full physical keyboards and internet access were the standard for professionals. Then Steve Jobs came up with iPhone and the rest is history.
DRY: Don’t Repeat Yourself
What did the unemployed professional do wrong? They broke the rule of DRY, which is a rule we follow in computer programming. The expansion of DRY is “Don’t Repeat Yourself.”
Focusing on a single project is good, but if you’re continuously repeating yourself, you’re not making any progress, and eventually, the market will catch up with you.
What could Kodak and Blackberry do differently? There’s a single word answer to that question: innovation. Innovation by definition is the opposite of concentration.
As we see from the examples above, too much concentration is dangerous. Concentration needs to be balanced with innovation, or in other words diversification.
A typical application of diversification is investing. We all heard the saying “don’t put all your eggs to a single basket.” That means don’t invest all of your money to a single asset. It’s good advice, which I’m trying to follow as well.
However, it’s a bit difficult to maintain an investment portfolio of twelve and more stocks. You need to follow their prices and news. All of that is quite some work for someone who isn’t a professional investor.
As a result, most people stick to their savings accounts, which bring negative interest nowadays, meaning that the interests don’t cover the inflation rate. My solution to that problem is SPY. It’s an index fund that tracks the S&P500 index, which consist of approximately 500 stocks.
My game plan is to keep 80% of my savings in SPY and invest the rest in diversification assets such as put options to hedge my portfolio risk and some cryptocurrency, mainly Bitcoin.
When Is Diversification Too Much?
You have to be careful with diversification though, because there’s always the risk of spreading yourself too thin between different projects. That approach would result in failure in all of those projects.
Eventually, you might need to choose one of those projects to focus on, which reminds me of the 80/20 Rule of Google.
80/20 Rule of Concentration vs Innovation
Back in the day, Google had an 80/20 rule for their employees. An employee had to work 80% of their time on tasks that were assigned to them. 20% of the time, they could work on a project of their own choice, given that the project would eventually benefit Google.
The 80/20 rule of Google was a good balance between concentration and innovation. As a result, they came up with some successful products, such as Gmail, and some interesting ones, such as Wave.
In my opinion, their mistake in the implementation was to divide a working week using the 80/20 rule. Roughly speaking, the employee had to work four days a week on their assigned tasks and one day a week on their own project. The oscillation between the assigned tasks and own project would inevitably create productivity loss.
Instead of the weekly time allocation, I would give an employee a complete, uninterrupted month to come up with a proof concept implementation of their own project. If the proof of concept was received well, they could go ahead and implement it.
If their proof of concept didn’t deliver the expected results, they would have to wait for another four months before being allowed to start on a project of their own choosing. This would satisfy the 80/20 rule and avoid the loss of productivity.
How to Decide When to Concentrate and When to Diversify?
Concentrating 80% of the time and diversifying 20% of the time seems to be a good balance.
If you concentrate more than 80% of your resources on a single project or investment, you are risking your career, business, or investments, because there is always the risk of that project or investment becoming irrelevant.
If you diversify more than 20% of your resources, you will not be able to make much of a progress in your business or career.
When to Concentrate or Diversify?
There’s a time to concentrate and there’s a time to diversify. There’s a formula to decide when to concentrate and when to diversify. This formula comes from my experience in solving computationally hard optimization problems.
The computationally hard optimization problems are modeled as vast search spaces, consisting of huge numbers of possible solutions. Each solution in the search space has a fitness value, which indicates how good that solution is.
Evaluating all the solutions in the search space is impractical. What we do instead is to find an intelligent way of traversing solutions. We evaluate the fitness of each solution that we come across and we keep the best one in the memory.
I believe this type of problems are a great analogy to real world problems. The balance of concentration and diversification is used in local search algorithms to solve this type of problems.
When we come across a region in the search space with lots of good solutions, we intensify the search. That means we spend more time in that region looking for better solutions. Once, we can’t find any better solutions in that region, we diversify to another region.
When we diversify to another region, the initial solutions we find are considerably worse than the solutions we found so far. This is to be expected. However, as we keep searching that area, better solutions might be found. Then, we can concentrate our efforts in that region.
Innovation Is Scary
Innovation is scary. It means getting out of your comfort zone and making a fool of yourself. You can’t perform well on a project that you just started as well as you perform on a project that you worked on for ten years.
I remember the first full screen smartphone of Blackberry, which meant to compete with iPhone. I had that phone and it was a total disaster. Until then, Blackberry ruled the smartphone market, but with their first full screen phone, they failed. This was to be expected.
When you innovate, when you diversify, when you explore new ideas, it is expected that you fail. The trick here is to fail quickly and fail cheaply.
You’re not trying to perfect the implementation of an idea, when you diversify. You’re just looking for an idea that would work in the market place.
The time to perfect an idea is not the first time you try it. The time to perfect an idea is when you find an idea that works in the market place. Only then, it makes sense to concentrate on that idea and intensify your efforts on it.
The secret to success is to know when to concentrate on a single idea and when to explore other ideas. When an idea proves itself to be promising, then it’s time to concentrate your efforts on it. When the returns of an idea start to fade, then it’s time to diversify and explore other ideas.
The golden ratio seems to be 80% concentration and 20% diversification. This ratio not only applies to time, but also allocation of your resources, such as investing your savings.
Disclosure and Disclaimer
At the time of writing this post, I owned SPY, Bitcoin, put options, and other cryptocurrencies. This post is for information purposes only and not intended to be business or investment advice.
Software developer with a Ph.D. and 15 years of experience. I write daily on personal development and life lessons. Sign up to my email newsletter to receive a weekly overview of my latest content on personal development and life lessons.