Guy Reams (00:00.184)
Day 68, the return paradox. Throughout my career, I've watched countless entrepreneurs, investors, and business leaders obsess over returns. They chase the highest percentage, the fastest growth, the biggest multiple. But here's what I've learned. A high rate of return is often a symptom, not the source, of value. Strong returns usually indicate that something underneath is working exceptionally well. It's the single greatest signal that you've built something that people are getting value from. In other words, money growth often reflects problem-solving power.
The business isn't growing by magic. It is flowing through a system that converts uncertainty, inefficiency, or demand into outcomes. This is why people are so focused on returns. They're chasing access to those systems, but they're looking at the wrong thing. The Efficiency Trap. I've spent years intensely focused on becoming more efficient. My goal was simple. Accomplish more, reduce workload, save resources like time and money. However, I've come to realize that humans aren't inherently efficient. Sure, we have moments of high efficiency, particularly when we're
deeply engaged and excited about a task, but more often than not, we find ourselves easily distracted, struggling to stay on task, and observing a gradual decline in our productivity. This pursuit of efficiency, of optimizing returns, led to burnout rather than increased output. It made me question, is there a more effective way to approach our goals, one that aligns better with what actually creates value?
The answer lies in understanding the distinction between efficiency and effectiveness. Efficiency is about doing things right, the art of accomplishing a task with minimal waste, effort, or resources. It's a measure of how well inputs are converted into outputs, emphasizing the most economical use of resources. On the other hand, effectiveness focuses on doing the right things. It concerns the degree of success in achieving a desired result, independent of the resources used. While efficiency focuses on the method or process, effectiveness concerns the end result or goal. Ideally, we aim to blend these two.
to be efficient, minimizing waste, and effective, achieving the desired outcome. However, in my journey towards enhancing personal productivity and building business value, I've learned that the balance is delicate. We optimize processes to enhance efficiency, but the real value often lies in empowering ourselves and others to be effective. The problem beneath the problem. Identifying the real problem is something companies will spend a lot of money to understand. I've had the opportunity to work for four large-scale operations in my lifetime.
Guy Reams (02:12.787)
In each situation the operation had reached a growth limiting issue that prevented any further acceleration. People had come to accept their current paradigm as the way things were. The status quo became a consideration of market or industry trends rather than what the organization might do to accelerate beyond competition. Many people would share opinions as to the problem but would rarely really identify a source that others would believe. Conversations would always open with that exact phrase, the problem is...
It's amazing how many people in a large organization can have such strong opinions on what the problem is without ever really getting to the truth of the matter. This is where returns become misleading. When returns are high, we assume the system is working. When they're low, we assume something is broken. But returns are just the output. They tell you nothing about the underlying machinery that produces them.
During my time in college and teaching computer science, I was exposed to a variety of problem-solving methods. Each one of them had methodologies around problem discovery, because this concept of uncovering the real problem has become obvious to anyone in business or management consulting. One of my favorites was the Ishikawa visual tool called the Fishbone Diagram.
One of many brilliant tools that Karu Ishikawa created was this diagram that allowed a team to resolve a core problem by investigating in a structured manner. He built an entire system around finding out the potential causes of a problem, organizing it into categories such as people, process, equipment, materials, environment, and measurements.
The point is that identifying problems is quite a science and should not be treated lightly. Investigating and probing potential problems is a healthy part of an organization. We underestimate the persons within an organization that are contrarian or always looking for ways things can break down. These are rare people, but highly valuable if they are used in a manner to troubleshoot, diagnose, and understand the real problems that are slowing down or preventing the success of an organization. Working on versus working.
Guy Reams (03:59.674)
and my approach to work has evolved into two distinct categories, inspired by Michael Gerber's concept in E-Myth Revisited, working on the business and working in the business.
When working on the business, I focus on building value through process optimization. This means enhancing efficiency by refining operations so that my team and I can follow streamlined processes, minimizing downtime and resource consumption. This effort, though often behind the scenes, is vital for improving the business's overall performance. Conversely, when working in the business, my priority shifts to effectiveness. This involves making strategic decisions, choosing the right goals, and ensuring our actions align with these objectives. Here, the emphasis is on ensuring that every
effort is targeted towards the most impactful outcomes, driving real progress. This is where returns actually come from. Not from chasing yield, but from building systems that solve real problems effectively. The returns are simply the market's way of saying, yes, this solves something important. Time, as the ultimate ROI. Benjamin Franklin's timeless adage, time is money, resonates profoundly here.
He wasn't merely equating time with currency. He was underscoring its value as a resource that once spent cannot be replenished. This realization brings us to a critical strategy. Treat time as your most valuable asset. It's about understanding that every hour spent is an investment in itself. Whether you're working on a project, learning a new skill, or even resting, it's crucial to ask, is this the best use of my time?
Our second strategy delves into prioritizing long-term gains over immediate gratification. Getting lured into activities that offer instant rewards is easy, but do they contribute to our long-term goals? American self-help author Robert Kiyosaki advocates for this in his Financial Teachings. He suggests focusing on assets that yield lasting value over those that depreciate. Applying this to time management means choosing activities that build upon your long-term objectives, whether career advancement, personal growth, or maintaining meaningful relationships.
Guy Reams (05:52.471)
This dual approach extends beyond the business realm into personal life. Consider your life as a system. To optimize it, you need to work on your life by improving systems and processes for greater efficiency. Then you focus on working in your life, engaging in activities that yield the highest personal value. For example,
Working on your life might involve establishing a morning routine that maximizes productivity while working in your life could be choosing to spend quality time with your family or pursuing a hobby that brings you joy. By working on your efficiency, you free up your most precious resource, time, to spend on what you value most. The real source of value in our relentless pursuit of productivity and returns, the distinction between efficiency and effectiveness often becomes blurred.
Through my personal and professional journey, I have learned that while efficiency is about optimizing processes, effectiveness is achieving the right outcomes. This understanding has transformed my approach to business and reshaped my personal life.
As we strive to make the most of our time and resources, we must remember that efficiency and effectiveness are not mutually exclusive, but complementary. We fine-tune our processes by working on our businesses and lives to ensure efficiency. But more importantly, by working in them, we focus on the effectiveness of our actions, ensuring that our efforts align with our goals and values. Ultimately, the true measure of productivity lies not just in how much we do, but in the value and impact of what we achieve. Whether in the boardroom,
or our personal endeavors, the balance between doing things right and doing the right things is the key to meaningful success. As we navigate the complexities of life and work, let us strive to be masters of both efficiency and effectiveness, recognizing that our greatest accomplishments lie at the intersection of these two powerful concepts. So stop chasing returns. Start building systems that solve real problems. The returns will follow not as the goal, but as the natural consequence of creating something genuinely valuable.