The law of diminishing returns is critical to think about for empire builders and deal makers. I think about this concept a lot because you can overstay your contribution. There are people that work on the first part of the curve well. They visioneer, design, set up and create strategy, systems, structure and opportunity.
When I get to to the point where I can see the concept working in a business and all that is required is repetition, consistency and talent, my greatest contribution is done. There are better actors for the next scene past the point of diminishing returns. They are managers. They make the machine work consistently. They drive the rest of the results curve and spend their energy output optimizing the system that has been set up.
If I continue and keep going obsessing and optimizing, years can go by without meaningful returns. I also give up the time and space for new ventures and projects that would have much higher output.
A few of us are better at pre diminishing returns. Many others are better past that curve. It’s important to know yourself and who you partner with. That timing of when to transition so you can drive the results curve is critical to the entrepreneurial journey.
So a few tips if you are an empire builder on the timing of exiting the diminishing return journey:
- If you are in the way, get out of the way.
- If you hate pushing on people and process consistently, you may have overstayed your time.
- If all that is remaining is to repeat what you already have proven works, you are at the point of diminishing returns.
- Every month that goes by that you are past the point of diminishing return is opportunity cost on starting new deals
- You need time and space to think creatively on big deals. Working in the micro ruins this precious requirement.
- Have a network of world-class managers to optimize what you have already proven.
I get miserable when I go past that point of diminishing return. Part of the trap is that I can execute, therefore, I sucker myself into the details.
However, I delude myself. I’m robbing future opportunities, teams and partners of my best contribution, that is front-loaded in dealmaking.
Have you found yourself in the trap of exceeding your diminishing return point?