image1 image2 image3


How we prioritise our actions

If you're running a company, or running the finances at your home, or even if you're actively managing your own time, you are constantly faced with decisions that involve prioritization. There are always immediate crises that you can choose to attend to or you can ignore the immediate crises and stick to your original plan of how to go about things.

It is like the government half way through it's budget year when a natural disaster hits affecting a portion of it's population or a big company is on the brink of default which may have cascading effects on the people who have deposited money in banks that have in turn leant that money to the company that is now bust and needs to be bailed out with taxpayer money. The government has to reprioritise it's budgetary allocations to now fund the rescue and rehabilitation efforts or the bailout.

You might think it is a no-brainer for the government to spend taxpayer money to rehabilitate a few thousand people affected by the natural disaster. It provides a lot more media mileage (duh! It obviously does if you think the decision is a no-brainer) and increases the chances of being re-elected than, say, if the same money was used to fix all the potholed roads that will probably save more lives by preventing accidents and enhance the lives of millions of people who drive through those roads everyday and end up with back aches and other ailments. The same money could even be spent on cancer research or better quality primary education which will likely have a bigger impact on society than rehabilitating victims of a natural disaster.

Don't get me wrong, I'm all for helping out victims of natural disasters. This is just an example (some people call it thought experiment). The idea is to highlight how we prioritise our actions.

That's how we all make decisions. We prioritise actions that have a greater "visual" impact and those that result in consequences that can be easily attributed back to our decisions. Everybody praises the government for channeling funds for rehabilitation while very few may praise them for reduced road accident numbers when they maintain roads in good condition.

I have seen this in the companies I have worked for and in my own personal life. Actions that have a greater visual impact are confused for actually having a greater impact than competing actions that may actually have a greater impact but may be less "visible". In this state of confusion, actions that do not have the greatest impact are prioritised and executed.

This is how we are trained and rewarded to make our decisions, so it's no surprise. The government has no reward for investing in something whose result is seen after their five-year term. If they have nothing to show for the five-year term, they will not get re-elected. Similarly, at a company, if your work may impact the company three or five years down the line, it has no bearing on your half-yearly appraisal as you have nothing to show for your half-year. The stock markets reward companies in a similar manner. If quarterly growth numbers are poor because of investments that may pay off in the long run, your stock may end up taking a hit (because the stock traders are themselves working towards their half-yearly appraisals and bonuses).

Perhaps, Google re-structuring into Alphabet might allow a shot at changing this, demarcating the decisions that need immediate and incremental impact on an on-going basis (revenues, active users, etc) and those that stand to have a bigger pay-off in a time-frame that doesn't necessarily interest those going after appraisals and dividends.

Focusing on the immediate and incrementally impactful forces you to narrow down your time horizon, exposing you to black swan events that can be devastating or have a unexpectedly high payout. 

Share this: