December 11, 2007

The Economics of Doing Everything

I remember in one of the meetings with our learning team's mentor where he shared the wisdom of having learning teams or CAN groups-- You can't do everything. That's why you have a team that will roughly have a finance person, a marketing person, a quant guy and operations person. The team composition, hopefully, creates synergy and build on the strengths of the members.

However, I do think that a single person can do everything. However, that person has Economics against him or her. There's this thing called The Law of Diminishing Marginal Returns or more popularly known as Diminishing Returns. Applied in our "do everything" situation, hypothetically a person can do everything, but at a steep price-- perhaps putting in an impractical amount of time, or having huge inefficiency in accomplishing the that feat. Doing or being everything is not impossible, but rather impractical.

We can also apply another economic concept, Opportunity Cost, into the picture. We can say that the time spent doing everything has an opportunity cost attached to it-- doing X means you can't do Y. If doing X is inefficient, you may be better off doing Y which has you could do better.

I'm not saying being good at everything is a bad thing. All I'm saying is doing everything includes doing a great deal of wasting your energies and time. And we don't need Economics to tell us that.