Frank Chen

Frank Chen

minimize opportunity costs instead of pursuing returns on investment

This type of prioritization can be summarized as the "rocks first, then sand" type analogy in order for us to work on the biggest hairiest problems we can tackle, instead of "incremental improvements" that thousand-cut us to death.

This is not to say that incremental improvements are not worth pursuing. Good product managers are always seeking good outcomes and high impact work. At some point, all the work that is being prioritized will have some kind of positive return on investment, so that metric begins to be a difficult one to judge off of.

Shreyas advises us to instead think about prioritization in terms of a function that minimizes opportunity cost.

Opportunity cost is value/impact obtained on a hypothetically optimal choice minus the value/impact of the option that you picked. We want to minimize this difference. That means we should be working on the thing that provides the closest amount of value/impact to the optimal.

The difference, in this case, is how we use our time. Instead of pursuing options that are a "good use of time" (good ROI options) we pursue the option that is the "best use of time" (closest to optimal project).

Shreyas reinforces this during planning by coming down with categories on how he'd like his team to approach prioritization:

  • 60% big, hairy, needle-moving ideas
  • 30% standard "ROI" incremental improvements
  • 10% stability and infrastructure

Source: Shreyas Doshi on Lenny's Podcast

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