QUOTE OF THE DAY

“Diversification means always having to say you’re sorry…If you’re diversified, there’s always going to be something in your portfolio that’s kind of sucking. 

There’s always going to be something that’s frustrating to you, at least on a relative basis, because it won’t have done as well as some of the on-fire portions of your portfolio. 

And we have to actually understand that that is a feature and not a bug.”

— Daniel Crosby

BROUGHT TO YOU BY

THE MAIN STORY: KNOWING WHAT NOT TO DO

Overview

It’s tempting to think you must give attention to every opportunity, request, or thing vying for your attention.

And while the cost of adding one more bullet point to your to-do list may seem marginally small, the cost is more than just your energy or capacity to work, it’s your time.

As we’ve previously discussed, there’s nothing more valuable than time. While it’s easy to think that it takes discipline to get everything done, it takes just as much, if not more, to know what not to do.

The temptation to do everything yourself, whether in work or life, is too convenient, especially if you have a self-sacrificing personality.

However, this isn’t just a philosophical question on how to live a good life. It’s critical to both business and investing.

Breaking it down

At our company, we call this “opportunity cost,” and we address it in our corporate values.

It’s actually our number one value: “Doing first things first.”

We try to organize all of our responsibilities in the following order for completion:

1. What’s important and urgent
2. What’s important and not urgent
3. What’s not important but urgent
4. What’s not important and not urgent

What to know

See, in business, there are often too many opportunities rather than too few. But not all opportunities yield the same return on your investment.

What’s most important and urgent is probably pretty obvious. Maybe that major report due next week?

You’ll notice, though, what’s important always gets placed ahead of what’s urgent.

Perhaps responding to a barrage of co-workers’ messages is urgent, but if it’s unimportant, don’t waste excessive time on tasks where your time could’ve been spent better elsewhere.

Examples of important but not urgent matters include carving out time for reflecting deeply on your goals and strategy, building relationships with others, or even just pondering the big picture of your efforts.

Applying it

It’s up to you to decide what’s important and to reorganize your calendar accordingly.

With this framework, you may find that you complete many trivial yet “urgent” activities in your work and personal life that come at the expense of more important affairs, especially those considered important but not urgent.

This is a tragic mistake.

With this value and framework, members of The Investor’s Podcast Network are expected to apply it to the decisions they make each day while working. And it’s proven immensely helpful to me in prioritizing my time.

I’ve learned to be extremely flexible while working here because we’re constantly reassessing the opportunity cost for decisions we make, whether in doing weekend editions of the newsletter or in anything else.

Putting it together

This concept underpins the effective allocation of time, which parallels effective capital allocation in investing.

Great investors focus on knowing a few specific bets extremely well and trimming out the distractions (easier said than done).

Great business managers identify the new projects and resource allocations that deliver the highest return and implement them. And only them.

A business manager or investor who cannot sift the noise from the signal will be left chasing every dot that pops up on their radar before flying into the ground.

In business, you’re measuring the return on invested capital. In your life, you should be measuring your return on invested time.

I think you’ll find that when you start thinking this way, your hurdle rate rises considerably for completing many of life’s incessant and urgent but non-important tasks.

Takeaways

In other words, think of it as applying a discount rate to your time. What sort of return do you require for your endeavors?

Being able to assess what’s worth spending your time on is both a profound question and a superpower. I firmly believe, though, that it’s the key to business and investing success, as well as to living a meaningful life.

Do the first things first.

SEE YOU NEXT TIME!

That’s it for today on We Study Markets!

See you later!

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