Risky Growth vs Safe Compounding

The sometimes successful strategies of gamblers and cowards

June 2018

A quote from from Khalid Halim that I've been meditating on:

"The law of startup physics: humans grow linearly, companies grow exponentially. The double-edged truth of the fast-scaling startup: If the company grows as it should, it will outgrow many of its people."

And with a personal twist:

"Humans grow linearly, opportunities grow exponentially. The double-edged truth of living skillfully: If you grow as you should, you will outgrow your own strengths."

I think this is a common problem for "achiever-y" people... Good decisions lead to good outcomes, lead to more opportunities, lead to overcommitment, lead to stress / compromised performance, lead to bad outcomes... and then the cycle repeats.

I've certainly been guilty of this before, and I think it goes a ways towards explaining the plateaus that follow periods of growth.

Yet I can't entirely condemn the practice. As my friend Bryan once put it, "risk is often underpriced" — and the occasional overcommitment has a chance of paying off extraordinarily well... if you manage to pull it off.

There seem to be at least two competing virtues here (as true for companies as for individuals):

1) Underpriced risk / high EV. This is the domain of the entrepreneur and capitalist, spotting possibilities and betting on making them certainties. It is the source of much innovation, but it's also the refuge of gamblers and magical thinking — "This will work, because it has to work!"

2) Sustainable compounding gains. This is the MO of athletes who pay as much attention to recovery as training. It's the not-so-sexy recognition that habits are powerful and limits are sometimes real. It's also the refuge of cowards and excuses — "Success doesn't take sacrifice; I'll get there eventually."

These are both situationally adaptive ways of coping with infinite opportunity. Both seem capable of producing either genius or delusion. And while I suspect most people are flexible, I have noticed a tendency to identify with one camp over the other.

What do you make of this dichotomy? Are there other strategies?

Specifically, how do you manage opportunity cost in your own life?