The Disutilities of Optimization
The Six Percent Entrepreneur
The Disutilities of Optimization
August 3, 2021
In this episode, we talk about why you don't need to focus on optimizing things that don't need to be optimized.
Alright in this episode, we are going to talk about a problem that a lot of MBAs and CFA s just can't seem to shed. So when you have people going through an MBA program, MBA programs are run by engineer, so you're learning how to engineer a business. And the problem comes when people try to over engineer the business because everything looks like an optimization problem and they actually start getting this utility from whatever optimization that they're doing.

So I call this problem the disutilities of optimization. And what the disutilities of optimization is is whenever you try to over engineer something, you actually end up doing the opposite because you bring yourself less utility because you're trying to either overcomplicate some process or you're doing something that just generally does not make sense or does not make you happy. So I'll give you a few examples of this. 

When I was working on this one project actually built this pretty cool Saas tool and now that I think about it, like oh my God, I was doing so many different idiotic things and in terms of trying to get this out to market um definitely wish I had known the stuff that I know now. But what I did is there was this huge thing in real estate where if you can get this information and information is power, but if you can get this information you can make a lot of money. So this information was properties that were going through the probate process. Well when properties go through the probate process, it's really difficult to find out who owns these properties, where these properties are, etcetera.

Now to back up a little bit and give you a little bit more context. If you're unsure about what probate means. When someone passes away, when a loved one passes away, they usually leave behind a lot of things and when they leave behind a lot of things, sometimes this stuff is real estate. Well, whenever these loved ones to get a hold of this real estate, the thing is they don't really want to live in that house or they don't want to own that property, they just want to liquidate it and they want to do it as fast as possible because they might need to pay off debts for the estate or they're just trying to piece it among their family members. So you have this issue where these properties just sit for a very long time trying to be sold. And there's people out there that are experts in this that you know, they can go out, take a look at the property, figure out how to liquidate it as much as as fast as possible so they can help these families out. 

So for me when I tried to learn more about this process, I learned that you can go to the probate court system, see which which brand new files are put into the probate court system and you you only get a name, so you get a first name and last name and you get a name of the next of kin. Now it's your turn to do some research and figure out if this person owns any property, right? So if you're doing this manually, what you would have to do is you get the name from the probate court system and then you would have to go to maybe some kind of real estate directory. So maybe an appraisal district database or something like this where you're researching this person to see if they have any real property. And if they do then chances are that they will probably sell it and this is a chance for you to get into that business if that's what you're trying to do. This is a lot of work. However, to do this entire research process, if you were doing it manually, it probably take you maybe an hour for every single file.

Well, I developed some software that cuts that time down into a couple seconds because essentially I'm just joining two database tables together where I'm gathering data from the Probate Court system and I'm gathering data from the appraisal district system. I'm just joining tables together and boom! I have the answers that I'm looking for and I'm doing it in an automated way where I'm not spending an hour my time. So when I first built this, I didn't even think about selling this as a SaaS tool, I was actually just kind of intrigued about this whole business model. I was learning from someone else and I was figuring I was trying to figure out how I can shortcut all these systems. 

Well, one of the things that I like to do is I actually like to build, and if you're a founder you probably love to build as well, and this is where you can start getting into trouble, where you start over engineering processes that don't move the needle for you. All they're doing is just moving around grains of sand for you to optimize, you know, each grain of sand as much as possible, but it's not really moving the needle for you. And this is a game that a lot of entrepreneurs play, because you're like, oh, I can optimize that. They don't know what the next steps are, so they just start working on this optimization problem. So for me, this was a marketing experience. If I had to send marketing materials out these probate families verifying to see if they have property or not, etcetera. Well, I built up an entire system for me to be able to automate that. And in terms of a system I had people writing out handwritten notes with handwritten envelopes, biggest things that they're not handwritten, then it's gonna seem like spam. We're using direct mail marketing.

 And this was one of the things that I did. Well, instead of focusing on the marketing message or focusing on really, you know, cool ways to start collecting data or anything where it actually makes me a revenue. Here's where I spent a lot of my time, I spent a lot of my time coding this system and as I'm coding the system, I coded an inventory module based off of this one little thing that I learned in my MBA Program and my uh my MBA Program, I learned this formula that helps you optimize your inventory so you can basically see what rate of inventory you're getting in and based on how much you have left when you should make your new orders, etcetera. So this is something that I just hated doing and I was like you know what I'm gonna spend my time to optimize this.

I was super proud that I was able to get this done. I had like this complete perfect system where I had this inventory management thing optimized and it was amazing. It was awesome. It was like I think if I showed my professors in business school they would be like outta boy, they would be proud, right? But here's the thing. I wasted all my time over engineering this one process and I didn't focus my time on where it really matters. And sometimes when you're just optimizing something for the purpose of simply optimizing it, you're getting disutility because it's a distraction and it's taking you away from the things that really matter in your business. And a lot of times when you're first starting out your business optimization is not what you wanna do. You just want to grow as fast as possible sustainably by moving the rocks that really matter, not moving the sand around, right? 

So for me, with this whole optimization problem where I'm trying to optimize my inventory management, I was just moving grains of sand around and I was getting this this utility of optimization. And that's the problem that MBA's face because they try to over engineer everything and without focusing on the stuff that matters. So don't Diesel yourself, don't optimize what doesn't need optimizing. Look at what the biggest rocks are in your business, don't move around the grains of sand. And you will be able to get much further without having to do all these things that the MBA's, ooh, this is Robin Copernicus boom bam, I'm out. 

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