Economics and Cultural Tradeoffs

Every decision that we make has a cost associated with it. Every… single… one. The cost is one of opportunity and it’s our job, for the rest of our lives, to learn how to spend it rightly.

This naturally applies to startups too—building a company is nothing more than a series of (small and large) choices, each one having a respective amount of cost, which may or may not be directly tied to some financial instrument or economic system.

Economics, as we all learned many years ago in High School, is about tradeoffs, which means that when you choose A over B it means you are intentionally forgoing a positive benefit and/or opportunity that you may have otherwise experienced or appreciated.

And those who do well in their economic studies also know that learning how to allocate one’s (scarce) resources and negotiating (opportunity) costs is the key to success. In startup world, it’s also as much about survival too—experience can help a little, but, not as much as we’d oftentimes like to think.

Time is the singular most important and fundamental constraint in the equation of economical tradeoffs—spending an hour doing one specific activity means that you can’t use that hour for anything else.

[It’s worth noting that it’s taken me nearly my entire life to understand the above sentence! And, many, many startups. I feel that if one can master this dynamic, then, you essentially win at life.]

Consequently, when you make cultural tradeoffs in your startup you are actually negotiating around the dynamics of time—how it’s spent, where it’s spent, on whom and for how long—things like that.

Your staff is the biggest contributor to your culture and the people you hire impact every economic system that your organization has, including (and most importantly), time.

For instance, if you begin to hire a team of folks who like to “move fast, break things” then the timeline for the product’s release cycle will be small and tight, resulting in faster delivery, at least in the short-term.

In comparison, if you begin to build a team of folks who’s normative behavior is contrast to that of “move fast, break things” then not only is the product’s delivery timetable lengthened but the product may be wholly more robust (e.g. less technical debt).

The cost? The tradeoff? The product team could be losing out on valuable customer feedback at a much higher frequency and pace resulting in a product that resonates faster.

Time passes, regardless of what we do with it. The question that the early stage team must relentlessly ask each other is whether they are maximally using their time on the right things, at least as far as they can tell.

And the number one question that the CEO must ask is if they are inviting the right people on the team at the right time, to maximize alignment and thereby maximizing time.

In the end, it all impacts the organization’s culture: The pacing, the timing of how things work and how much stress the business feels every time a product iteration is delivered. If you’re the founder, then, you get to decide on how most of this operates and feels.

But it will require difficult, yet important choices. Tradeoffs.