Question · Sustainability
How do I balance short-term vs. long-term?
The Short Answer
Maintain reserves for uncertainty while investing for growth. The ratio depends on environmental volatility - more uncertain environments require larger reserves. Never sacrifice the ability to survive a downturn for short-term efficiency, but also don't hoard resources that could compound if invested.
Biological Insight
Organisms face this tradeoff constantly. Bears hibernate with fat reserves; camels store water; squirrels cache food. These reserves are 'inefficient' in good times but essential for survival through bad times. The optimal reserve level depends on volatility - desert organisms store more water than rainforest organisms. Organisms that optimize purely for good conditions don't survive the bad ones.
Key Questions to Ask Yourself
- How long could you survive a 50% revenue decline?
- What's the minimum reserves needed to survive foreseeable downturns?
- Are you sacrificing compounding opportunities by over-saving?
- Do your reserves match your actual environmental volatility?
- Are you investing in things that mature only long-term?
Common Mistakes
- Running too lean in pursuit of efficiency (no reserves for downturns)
- Hoarding cash that could be productively invested
- Making long-term investments during short-term crises
- Sacrificing long-term capabilities for short-term results
- Not adjusting reserve levels as environmental volatility changes