How to reach your Goals — The 10x Principle for Success in Life and Business
Summary: Success in life and business ultimately depends on the quality and speed of decisions and their implementation. This article sheds more light on this profound insight and guides readers on how to reach more success.
Recently, I was having dinner with a friend working at a large private equity fund. He told me an interesting story about a buy-out deal and three people: A founder selling his company, the partner of the private equity fund and the partner of a Big4 accountancy.
All of them were in a room to discuss the final details of the deal and all three had one thing in common: Intellectually, they were able to discuss the finest details of the deal on exactly the same level. All three of them were equally smart, yet, the founder would make 500 million in the deal, the PE partner would make 10 million, while the Big4 partner would be lucky to make 100k.
So how did these three equally smart and capable people end of at such different economic outcomes? The answer to this, ladies and gentlemen, is a very simple yet profound one: Decisions. The founder and the PE partner made better decisions earlier in life increasing their earning power down the line. In the end of this article you will learn the underlying mechanics of how decisions drive success and how you can manipulate these levers in your favour.
First of all, success is not only linked to decisions, but also of the actions you take, i.e. the implementation of these decisions. A series of well executed actions will often lead to the desired result. Secondly, success is the product of the actions you take. This is a very important distinction because it implies a non-linear relationship between input (actions) and output (success). Each and every action is dependant on previous decisions and benefits from good choices made previously. If this is done successfully, you get what I call the compound impact of decisions, a mental model used to emphasise the importance of making good decisions quickly. It works similar to the concept of compound interest.
Now, let’s take this abstract concept and apply it to something more relatable from the world of sports: In 2004 and 2005, tennis player Novak Djokovic was ranked 100th in the world, winning 49% of his matches and 300k in annual prize money. Between 2010 and 2016 this improved to 3rd in the world and 5 million in annual prize money, winning a grand total of 79% of his matches. So how did Novak Djokovic do that?
Looking at the tiniest pieces of the tennis match, a player needs to decide where to run, how to hit the ball, where to aim and act accordingly. It’s all just a series of decisions and their implementation. So it’s not surprising that the answer to this is very simple: Djokovic did a tiny improvement from 49% to 52% of points won linked to better decisions and implementation as a result of experience. Yet, this improvement of 3% lead to a 1500% improvement in his income. Exactly this is the non-linear impact of compound decisions.
Now, let’s apply this to a real world start-up example. In the beginning of the week, the status quo of your business is 10 million valuation. 10 million is the value of all the decisions you have taken and implemented so far. With a bit of simplification, you can say that is the Net Present Value (NPV) of your company. Now on Monday you hire a new VP of Sales. That increases your NPV, because it will enable you to increase your sales prowess. On Wednesday, you listen to your customers and give your product team input on how to improve. And on Friday you have office drinks to improve your company culture. In the end of the week, you will have made progress towards making your company successful.
Another way to consider the importance of making speedy decision-making is the following. Consider every time you make an important decision, you hold on for one day to reflect. On a micro level, losing one day may not seem as severe. However, on a macro level, always delaying by one day means you are wasting half of the year. Over your whole career it means you would have wasted half of your entire career. Therefore, one’s mindset should that in most situations it’s advantageous to just start executing and course-correct if needed. This is similar to the basic idea of Eric Ries’s “lean start-up” approach.
Now, you may wonder why I stress so much about the compound effect of decisions. Being 10% better here and there surely doesn’t matter so much. And here you could not be more wrong. Actually, when I did the math, I was completely shocked by the results. I did not expect the effect to be so dramatic when I looked at the average decision quality and number of decisions taken per week, assuming instant implementation. But see for yourself:
What you see is that if you start your year with a base value of 1 and you make 5-10 on average slightly bad decisions each week, your start-up will be a car wreck after one year. If you take one fairly good decision per week, your NPV doesn’t increase quickly, you have a slowly growing life-style business. And what is more, if you can make one good decision every day, you are going to achieve the 10x+ results and you may be on your way to become a unicorn.
In contrast, one of the reasons why most companies stagnate or fail and only a few unicorns exist is the following: As organisations grow, complexity increases. This makes decision-making lengthier and expands implementation times. What is more, it gets hard to make the right decisions and implement with accuracy. Large incumbents, basically most of S&P500, turn into “The Walking Dead” until they eventually get disrupted by start-ups that can often out-manoeuvre. “The Walking Dead” cannot unlock the potential of compound decision-making.
However, before you start churning out dozens of decisions a day, bear one caveat in mind: Decision fatigue. Decision fatigue is an observation, which says that the more decisions you make, the worse the decision quality gets over time. Therefore, you should make the most important decisions in the morning when your mind is fresh and postpone less important decisions towards later in the day when less brainpower is required to maximise impact adjusted decision quality.
Anyways, the most important take-away from this is the following: Build an insane bias for speed and action. To me, great execution is the secret for building unicorn companies. And great execution means simply great decisions and great implementation at break-neck speed. Then you get the compound effect of decisions working for you. This is akin to Mark Zuckerberg’s notion: “Move fast and break things” The faster you execute, the more successful you will be.
Having realised the importance of compound decisions, the next step is to implement this framework in running your daily life and business. At my company 10x Value Partners, we urge founders to move faster and we carefully ensure that better decisions get made. Our goal is to make the company 1% better every day to achieve the 10x improvement over the full year. This helps our companies to outperform their peers and become successful faster and with a higher certainty. Therefore, we create excess value for founders that typical venture firms are unable to provide.
In particular, we acknowledge that all founders are different in their skills and capabilities. I personally believe that the best founders have some weaknesses that need to be worked on. Hence, a differentiated approach is necessary to ensure this 10x improvement and I customise my approach of helping the founders for each situation. To give you an example: For one founder, I do a preparation call 5 minutes prior to all calls with important external stakeholders to ensure our objectives are clear and we reach our goals more effectively.
If you don’t have the luxury of having myself as your mentor, there are other ways of achieving more success through better and faster decisions. Firstly, you can find yourself an external mentor. However, if your mentor does not have equity in your success, the level of investment in mentorship will likely never be as high compared to what we can do at 10xVP. Another way to improve your decision quality and speed is establishing a mastermind group with likeminded peers that can be as simple as a WhatsApp group chat. The other members of your mastermind group can then help you with decisions that are important and can push you to move faster.
So, if you want to 10x the results of your business, contact me and we can talk about building a company together. There are only limited seats on the bus, so be sure to act fast. Also, investors who want to participate in 10x companies, do contact me.
Many thanks to Benedikt Hübenthal for supporting with research and editing of this article. If you want to become a volunteer for my think tank and be first in line for learning the secrets of success, do message me to apply.