All-in On Balance
The best and safest thing is to keep a balance in your life, acknowledge the great powers around us and in us. If you can do that, and live that way, you are really a wise man.
- Euripides (The Bacchae, c. 406 BC, Kenneth Cavander translation)
People often refer to themselves as being “all-in”. It’s a catchy term from poker while also being a popular and informative business podcast.
Used casually as a synonym for committed, I have no problem with the term.
However, I believe the term also provides a convenient excuse for highly motivated people to avoid making thoughtful decisions about time and energy management. In other words, saying “I’m all-in” puts a positive spin on potentially workaholic type behavior.
What is extreme dedication?
I have heard a few different versions of an axiom espousing that “extreme dedication is required to generate extreme results.” Given that 80-90% of technology startups shutter, it’s easy to see why many in Silicon Valley believe this axiom. Don’t most ambitious people feel intensely dedicated to their craft?
I believe this axiom conflates the nature of winner-take-all market dynamics (fueled by network effects) with personal time management. Both of these statements can be true:
Extraordinary results will accrue to a small percentage of companies (aka the Power Law)
Such extraordinary results can be driven by individuals who still have a strong element of balance in their lives
Defining what ‘balance’ means here is critical. But first a primer on the Power Law.
The Power Law distribution of outcomes
The Power Law is a statistical distribution pattern, common in venture-stage investing, that dramatically skews results for startups that do endure. For the charts pictured below, assume the x-axis is investment returns (i.e. multiple of invested $). As one moves from left to right on this power law distribution, a smaller and smaller group of companies (i.e. a lower frequency of companies) generate a greater amount of the returns.
This dynamic is even present in public company investing. For example, within the Russell 1000 stock index1, the “magnificent 7” stocks or 0.7% of the index by company names, generated 62% of the overall increase in market capitalization-weighted value of the entire index in 20232.
Network effects fuel the Power Law
Underpinning the Power Law, many successful technology companies are in winner-take-all (or winner-take-most) markets where network effects drive exponential customer growth. Network effects are created when a product or service becomes more valuable to users as more people use it. For example, each incremental user of Facebook makes it more valuable to existing users and drives increased platform usage. Conversely, many large consumer product brands do not exhibit the same level of network effects and therefore more “winners” can be possible (e.g. each incremental purchaser of Cheerios doesn’t make it much more valuable to the next purchaser).
How to define ‘balance’?
My definition of balance is different from the dictionary one that indicates an equal weighting of 2 sides. Rather, I define balance here as accurately identifying and meeting one’s commitments in life.
Balance is a very difficult quality to evaluate since it requires a goldilocks sense for identifying ‘not too much’ and ‘not too little’. For many other important qualities like love, honesty or curiosity, it’s typically much more important to avoid the ‘too little’ side, while veering too close to the ‘too much’ side is usually not a major problem.
Another way to evaluate balance involves what is known as balancing “polarities”. Polarities are sets of opposites that cannot function well independently3. For example, the concepts of ‘stability vs change’ or ‘efficiency vs thoroughness’ are polarities. Neither side is a comprehensive solution if it involves ignoring the other side. In the real world, human personalities often lean towards one side and fail to appreciate the other side. Taste is personal!
Skilled managers are adept at balancing polarities since they pop up everywhere in building a business with limited resources. Often the “optimal” balance point is not obvious initially. As such, the best strategy is to consistently test, tweak and iterate as more data becomes available.
Does quantity impair quality?
Is it not possible to care deeply about professional success while also appreciating that professional performance depends on the quality, not just quantity, of hours each day? For example, if someone is neglecting key personal relationships and not exercising regularly, are they really going to bring their most creative and highest horsepower mind to work each day?
Acknowledging sacrifices versus blaming work
At various points in our lives, the amount and type of sacrifices we choose to make in order to succeed will differ. A 25 year old may choose to sacrifice sleep at the expense of work and socializing. A 45 year old may sacrifice socializing at the expense of work and family responsibilities.
Where I see ‘hustlers’ often falling down is around the belief that they can squeeze everything in. There is a dissonance stemming from an internal belief (“I can do everything pretty well”) to the external reality (“I am showing up for most things sub-par”). Being extremely clear about personal priorities, sacrifices and their resulting commitments is a critical element of finding balance. Greg McKeown has written a book eloquently examining this concept called Essentialism.
Venture-stage investing is a process of identifying outlier companies in the face of challenging odds. Any success is likely the result of many factors, including team work ethic, product design, customer service and creative marketing. Let’s not forget about balance too.
A broader measure than the S&P 500 and, similarly, market capitalization weighted