Are You Optimizing For Measure Or Magnitude?

A useful mental model for decision-making.

Making good decisions is the main driver of success for your consulting business. And most of them will consist of choosing how to invest your time and resources in the right way. One helpful mental model for you to do that is learning how to differentiate measure and magnitude.

To prioritize initiatives and decide what and how to drive growth to your practice, you will need to estimate the value of different activities.

But this is hard. Your business is a complex system, and each decision you make ends up affecting other parts of your consulting practice and often generating unintended consequences.

What we can do is to avoid overly complex calculations, step back, and look at the value of our decisions from a time perspective.

Measure and Magnitude

The decisions you make and activities you perform create some value for you. But different events generate value in different ways:

  • Some activities provide a lot of value in a one-off burst. For example, flying first class can be great, allowing you to rest better during a long international flight. But once you land, the value is gone.
  • Other activities provide lower value, but in a recurring way. For example, buying a high-quality office chair may seem like it's only a small upgrade from a regular one. But you will benefit from more comfort and an improved posture every day for the next months, or even years.

This is the idea behind discerning measure and magnitude:

  • Magnitude is the value of an object or activity at a particular point in time.
  • Measure is the time period over which the object or activity contributes with value to your life or business.

Both are important. When we make decisions, however, we have a natural bias towards high-magnitude alternatives. But there are good reasons why measure is often a better indicator.

The Advantages Of Putting Measure First

Let's say you want to increase your marketing activity, and have two alternative initiatives you can run:

  • You can hire an agency to perform a done-for-you campaign. This will run for a 3-month period, require no investment of your time, and cost you $6,000.
  • You can hire an advisor to plan and teach you how to launch and run custom campaigns. This can be performed indefinitely but will cost you 2-3 hours/month of your time + $4,000/month (2x more than the agency).

You can only choose one. Which one do you go with?

If you're thinking "it depends on the ROI", notice that I did not give you the expected outcome from the campaigns. Both are new initiatives to you, and your expected results may end up being quite different from the actual ones. Just like most things in life, you can't rely only on ROI to take the decision.

I would choose the second option, which presents higher measure, every day. The reason is the hidden costs from choosing magnitude. Here are some of them:

  • The cost to decide: You need to invest time and energy to understand your alternatives and before making any conscient decision. When you engage in one-off or short-lived activities, you repeatedly come back to square one. For every new campaign, you will need to find, compare, and negotiate with different marketing agencies - increasing the total cost of the initiative.
  • The lack of insights and reliable data: Another problem of choosing magnitude over measure is data. The longer you use or implement something, the fewer insights you can take from it (and the less reliable your information is). This is especially true for marketing. Hiring a long-term collaborator will allow you to iterate initiatives and discover what works and what doesn't.
  • The inability to compound: Small improvements compound, but only if you do sustain it over time. Buying a more expensive but durable product will ensure you learn how to make the best from its features. Hiring an advisor or forging a long-term collaboration will allow you to build a trusted relationship, and enable the other party to deeply understand your consulting business.

Other Examples

Making better decisions about which goods and services you invest in is helpful, but I think the highest impact of this mental model comes from thinking about “measure” in other domains.

Here are some examples of high-measure things you probably under-invest:

  • Nurturing relationships: Making a deliberate effort to create and cultivate better relationships will generate value for years to come, and have a big impact on your happiness level. It's probably worth getting better at it, either by implementing support systems or by coaching.
  • Speaking: We speak with other people all the time, and it's through speaking that we communicate and exchange ideas and form relationships. We can invest time and energy to become better speakers by joining communities such as Toastmasters or getting specific training.
  • Healthy diet, sleep, and exercise: When we're asked to prioritize the many aspects of our lives, our health (physical and mental) usually comes first. You can't build a sustainable consulting business, and an overall happy life, without them.

Take some time to think about it: What are some high-measure services or physical items you can invest in, that will keep on giving for a long time?

Thanks for reading. You can get more specialized and actionable growth insights for micro consultancies in our newsletter. Every Tuesday, you get one idea from Danilo, one quote from other experts, one number you need to hear, and one question for you to level up your consulting practice.

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