“We’ve had enough good sense that when something is working well, we want to keep doing it…We’re demonstrating what might be called the fundamental algorithm of life: repeat what works.” –Charlie Munger on Berkshire Hathaway’s unifying theory, pragmatism
We’re fixing a struggling business. First, we must do more of what works.
Every business has products that sell well, marketing efforts that generate profits, people that produce what’s needed, expenses that serve–and those that don’t. Before we do anything new, we sift through what’s working.
Humans love the new. Medicine, skyscrapers, and the internet wouldn’t exist without the compulsion to explore. Pursuing novelty also ruins lives, relationships, businesses.
We must first secure that which is proven before we invest in that which is new.
A few activities drive the output. 80/20; first things first; core, growth exploratory; four hour workweek; Eisenhower Matrix. Many models, one principle: do more of what works, less of what doesn’t.
What produces profit? Do more of it.
- Products
- Marketing channels
- People
- Service
Cut or reduce all else.
- Products nobody buys
- Marketing that loses money
- People no longer needed
Cutting costs produces immediate results. It frees up money and time to grow revenue. Cut costs first.
How deep do you cut? Until you get to your profit target.
Any additional profit from revenue growth is a bonus.
Don’t expect better results from activities you don’t change–people, marketing channels, products.
An algorithm for entrepreneurship:
- Experiment as much as your time and bank account allow
- Repeat what works
- Stop what doesn’t