In this post you’ll learn the answers for the questions: what is the barbell strategy about?
One of the biggest things that makes the difference between winners and losers in the world of business is strategy. The quality of the offered product/service has its own part, but often, we see businesses with less quality in comparison to that of the competition outperforming it, in important factors like sales and brand recognition. What causes such a thing to happen in the first place is unclear, but if we were to bet on one thing, that thing would be strategy.
A strategy is a form of bet, whose biggest promise is the result we seek. That result in business could be something as simple as keeping the doors open and preventing them from ever closing, or something as ambitious as dominating the market and taking the places of current leaders. One famous strategy that can be both applied in business, investing and life in general is the barbell strategy.
What is the barbell strategy?
The barbell strategy is in simple terms, about betting on opposite, or almost opposite sides of a situation, and nothing on the middle. As taught on the books “The black swan” and “Antifragile” by Nicolas Taleb, its important to minimize our exposure to negative black swans, while increasing our exposure to the positive ones. Its about avoiding the actions/bets that can “kill us” on the advent that everything goes wrong, and betting on the ones whose returns are not only just high but uncertainly so, on the advent that everything goes well. This is what the barbell strategy can do for you and your business.
By taking both hyper conservative and hyper speculative actions, one can take advantage of black swan events, instead of being a victim of them.
Business and investing
For investors this could mean putting most of the money in the super safe investments, and a small percentage of it in highly speculative ones. In the worst case, only a small portion of the portfolio is lost, while on the best case scenario on the other hand, it could mean growth of immeasurable nature. In business this could mean, spending more resources in already market approved products/services, while allocating a small amount of the same available resources in exploring new and untested ideas.
For the business world, since only a small amount of the resources is invested on the new and untested products, we can borrow from the lean startup methodology; Which advises us to create a minimum viable version of the product, and happens to require less resources by nature.
It is all about knowledge and experience 😉
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