Helpful fashions: the barbell technique

The barball strategy, popularized by Nassim Taleb, is a method to navigate threat/reward tradeoffs whenever you’re skeptical in regards to the accuracy the chance estimates. Whereas it originated in monetary investing, it may apply to product and enterprise technique.

Think about a menu of investments starting from low-risk & low-reward to high-risk & excessive reward. The barbell technique picks largely conservative low threat investments to cap losses, and some excessive threat bets within the hopes of outsized payoffs. It ignores middle-of-the-road investments.

The important thing perception is that threat estimates have systemic bias to understate the chance. For instance, initiatives are way more more likely to be late and over-budget than early and under-budget.

Thus, middle-of-the-road investments are typically riskier than managers suppose. The barbell technique is resilient to poor threat estimates.

I’ve discovered this mannequin implicit in John Doerr’s method to product technique when he advocates for a mix of largely “roofshot” product investments, and some “moonshot” product investments.

It might probably additionally apply to enterprise technique of when to defend current markets versus broaden into new markets.