Some years ago, two economics researchers authored a paper analyzing when a hockey team should pull its goalie when it is trailing in a game. “Pulling the goalie” means that the goalie would leave the ice in favor of bringing on another attacker and give the team its best chance to score a goal. Of course, pulling the goalie and focusing on offense means that the goal is unguarded. By adding an attacker, you increase the possibility that the other team will score on an empty goal. But according to the paper, pulling the goalie—that tradeoff—makes a lot of sense in certain scenarios and at different times in the game depending on the score.
If you are losing 2-1 and need some additional offensive firepower, it makes sense to pull your goalie and add an attacker. If because of your decision, your opponent shoots into an open net and you lose 3-1, there is no real statistical difference. It still made sense to pull the goalie. A loss is a loss. But there are nuances to this decision based on outside factors, like the coach’s own separate or personal motivations. These other factors can influence a coach to make a statistically wrong choice when considering the options.1
Pulling the goalie is a classic example of a tradeoff. As stated in his foundational article, “What is Strategy?”, Michael Porter states that “[t]rade-offs occur when activities are incompatible. Simply put, a trade-off means that more of one thing necessitates less of another.” (68) And Porter identifies three reasons trade-offs exist: (1) “inconsistencies in image or reputation,” (2) “from activities themselves,” and (3) from limits on internal coordination and control.” (68-69) Hermès sacrifices its ability to make its products widely available to more customers in favor of upholding an unmatched level of quality craftsmanship and luxury. That is a tradeoff for image or reputation. Porter uses the example of Ikea for the second category. Ikea has created a customer experience around convenience, affordability, and a variety of styles. But it trades those things for what you might experience in another furniture store—a dedicated salesperson to help you, furniture made of higher-quality materials, and furniture you do not need to construct on your own. Ikea makes tradeoffs in its products, and Ikea consumers make tradeoffs when they decide to purchase from Ikea rather than from another furniture store. Finally, the limits on internal coordination and control refer to a company’s focus on its own product or service. Particularly for newcomers to a market, it is often far better to find a narrow niche and be the best in that niche. A new department store—even one with unlimited startup funding—should not try to compete with Walmart and be all things to all people. That is a losing proposition. But a new company may excel with a smaller scope and actually beat a Walmart in a certain part of its business.
Making these kinds of tradeoffs are the key to progressing in business. They “are pervasive in competition and essential to strategy.” (69) Companies that neglect tradeoffs—really understanding and committing to making them—“never achieve a sustainable advantage. They will have to run faster and faster just to stay in place.”
A great example of tradeoffs is Steve Jobs’s work at Apple. He was one of the great innovators in our time, and he understood the nature and necessity of tradeoffs. He talks about that process in the first couple of minutes here:
“It’s that process that is the magic.” Working on an issue, asking what tradeoffs need to be made, and distilling everything into a finished product—that is the process that leads to truly great products. And Jobs put his focus on those areas where he saw a much higher return, like improving the software and hardware to standards that far surpassed the competition.
Some businesses do not get it. Recently, in northern Arizona, I passed a restaurant with a sign outside that read: “Greek Italian American Restaurant: Original Pancake House.” The parking lot was empty. That is a business unwilling to make any tradeoffs. Maybe they have not even gone through the process of identifying tradeoffs and how it could benefit the business. But rather than dominating the pancake market or the Greek cuisine market in small-town Arizona, they tried to be all things to all people at all times of day. And it didn’t seem like it was working.
We make decisions and tradeoffs every day and in different parts of our lives, but we often do not see them for what they are. We choose to have a salad at lunch rather than a burger. We opt for a less flashy but more fuel efficient vehicle. We buy designer labels rather than fast-fashion disposables. We read a book instead of watching Netflix. We drink a club soda instead of a gin and tonic.
We usually make these kinds of decisions without deliberation. We do not create a pro-and-con list before we order lunch. After a while, some decisions become automatic. Because if we’ve decided to eat well and live healthier, it’s easier to choose fruit over dessert and the like. We have guiding principles that make individual decisions about tradeoffs much easier. But perhaps we should think more before we make a decision. (In considering good and bad options, some researchers argue that it is “morally corrosive” to dwell on morally bad options as tradeoffs. If we consider a course of action contrary to our moral compass, they say, “the longer one contemplates indecent proposals, the more irreparably one compromises one’s moral identity. To compare is to destroy.”)
In big situations involving tradeoffs, we take our time. If you are married, choosing your spouse meant that you were choosing one person and excluding all other people on the planet. That’s quite a tradeoff. And that is why people generally take their time before deciding to get married. But looking at decisions in the course of a day rather than a lifetime, think of how you use your time. Time is a huge tradeoff because once the time passes, you cannot get it back. An evening binging Netflix is an evening you cannot spend working on a side project, talking to a friend, going to the gym, writing the great American novel, or bonding with your family. In economics, people call this “opportunity cost.” We don’t usually think of it that deeply when we grab the remote, but perhaps we should.
A friend of mine went to MIT for his doctorate. When he arrived, his cohort was told that “MIT offers three things: (1) good grades, (2) a social life, and (3) sleep. Choose two.” They wanted the PhD students to know that they could not have it all. And that it was ok. In business, we say that you can have something (1) better, (2) faster, or (3) cheaper, but you can only choose two.
Many young people, however, want to have it all, and they are never told that there are real limits to that idea. Going full throttle in your career in your twenties and early thirties may make it more difficult to find a spouse when you decide your bank account is sufficiently full. We are cautioned: “Never make predictions, especially about the future.” And while it’s true that we cannot know the future, we can expand our understanding of the future by looking at the tradeoffs. By doing X today, that necessarily means that I will not be doing Y later. Or, more accurately, by doing X today, that means I will not be doing Y, Z, A, B, C, D, E, etc. in the future. A decision—from the Latin literally meaning “to cut off”—is a choice for one thing, path, person, etc. over and against all others.
Cal Newport’s recent book provides a bit of an antidote to the desire to do everything all at once. Slow Productivity promotes what it sounds like—giving yourself time to accomplish things on a reasonable pace. A great example comes from the third chapter, “Do Fewer Things.” There, Newport talks about Jane Austen. As he describes it, Austen’s family make “a fateful decision . . . in 1809 that swung the conditions for productivity dramatically back in Austen’s favor.” (51) That decision was “to largely absent themselves from the social scene in Chawton.” (51) It “was not a decision made lightly,” and led them to have “‘no dances and few dinners’” with others in the town. (51) Yet the time away from all these things allowed Jane Austen the time and space to write her novels, and she quickly finished Sense and Sensibility, Pride and Prejudice, Mansfield Park, and Emma.
No one can argue that we would all be better off if Jane Austen spent more time partying and enjoying the Chawton social scene. Austen made a deliberate choice, in the face of many societal pressures to do otherwise, to be a writer. That meant that she had to create the conditions for doing her work well, which necessarily required specific tradeoffs. And we are all the better for it.
Newport’s argument for slow productivity is not, to be clear, an argument that we should have less productivity. We can be incredibly productive, but there is a way to pace ourselves so that we can do everything—just over the course of a lifetime rather than right now, all at once. “[D]oing fewer things [at a time] makes us better at our jobs; not only psychologically, but also economically and creatively.” (60)
In all of these decision points throughout our lives or careers, we need to recognize the tradeoffs we are making and to be fine with that choice. If you want to be a concert pianist, you are not going to be able to be an ultra-marathon runner as well. The level of dedication and time required of each will not allow you to do both. We need to have a Rich Roll or David Goggins-like focus. Roll and Goggins are great examples of trading off everything else that does not fit the narrow scope of goals that they identified for themselves. If something detracted from their goal, it went by the wayside. And. That. Was. Fine. More than fine, it was actually the key to their success.
We have many opportunities in life to pull the goalie and pursue certain goals to the exclusion of others. Let’s just be aware of what we are doing so that we can move forward with confidence and without regret for the tradeoffs that we leave behind.
Remember to turn every page. Enjoy your weekend. Please let me know whether you need anything.
Best,
Aaron
The article is particularly interesting when it talks about why many coaches do not pull their goalies at the statistically optimal time. Often, it is due to the coach’s underlying motivation—job security—and not reaching the best possible outcome for a particular game. These are some of the different incentives, both internal and external, that we compare when we make tradeoffs. We may pursue a career we don’t like because it is a better source of income. Or we may choose to avoid something because it takes us away from our families (like not taking a higher-paying job because it has more regular travel requirements and we would be gone a lot). Being aware of these influences will help us make much better decisions.
Aaron, thank you for the clear and succinct articulation or your ideas. I enjoy your articles.