In 2009, Stanford business professor Tina Seelig split her class into groups and issued a challenge:
Each group had $5 and 2 hours to make the highest return on the money.
At the end, they'd give a short presentation on their strategy.
What happened next was fascinating:
Most of the groups followed a simple approach:
• Use the $5 to buy a few items.
• Barter or resell those items.
• Repeat
• Sell final items for (hopefully) more than $5.
These groups made a modest return on their initial $5.
A few groups ignored the $5.
They thought up ways to make the most money in the allotted time:
• Made/sold reservations at hot restaurants.
• Refilled bike tires on campus.
These groups made a good return on the initial $5.
The winning group took a very different approach:
They had three realizations:
1. The $5 was a distraction.
2. The 2 hours of time was not enough to make an attractive, outsized return with a mini-business.
3. The most valuable "asset" was actually the presentation time in front of a class of Stanford students.
Recognizing the value of the hidden asset, they offered the presentation time to companies looking to recruit Stanford students.
They sold the slot for $650, a huge return on the $5 of initial capital.
The winning group thought differently and achieved an asymmetric outcome.
So, what can we learn from this story?
Here are 3 steps to start thinking differently:
Step 1: Avoid the Distraction
There will always be an "obvious" solution that is simple, clear, and entirely wrong.
In the challenge, the $5 was nothing more than a distraction. It was a trap.
To find the best path, you have to avoid the distraction.
Step 2: Ask Foundational Questions
Ask and answer questions that expose and vet underlying assumptions and logic.
• What's the real problem you are trying to solve?
• What's your hypothesis? Why?
• What are your core assumptions? Why?
• What evidence do you have?
• What are your core options?
• What alternatives exist?
This takes time, but it's an essential exercise when facing a problem with the potential for non-linear rewards.
Step 3: Select the High Leverage Approach
Slow down and evaluate the options on the table.
Select the path most likely to generate the asymmetric, attractive risk-adjusted returns.
If the story teaches us one thing, it's this:
Creative, non-linear, asymmetric thinking generates creative, non-linear, asymmetric outcomes.
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