Powers of ten

All throughout my career, a common pattern has repeated itself time and time again: You want to do something that requires resources (money, people, time, and so forth); you ask for n resources; after much wrangling, the business gives you m resources, where m is significantly lower than n1.

When I put together my first budget at Noom, therefore, I was prepared for the usual haggling; imagine my surprise when our COO Adam instead asked me what I would do if I had ten times the amount of money I was looking for. After several double takes, I said I would have to think about it and get back to him.

Fast forward a few days, and we met again to go over the figures. My budget hadn’t changed dramatically, since it was realistic to start with. If I had a much bigger budget, most expenses would remain at the same level, because they satisfied our needs and there was simply no need to spend more money on them. For some items, however, knowing that we could spend more money would dictate a different approach that, while a little more expensive in the short term, would give us more room to grow well. The new budget was actually slightly lower than the original2, but this new approach had forced me to deeply rethink my approach in some places.

Smaller, bigger, wronger

Still, Adam didn’t push back on anything. Instead, he asked: “What if your predictions are off by a factor of ten?”

I was kind-of ready for this question, but not quite to the extent of the challenge it represented. Even in those days, when the budgets were comparatively small, I always made sure that all the budgetary requests would be backed by some kind of metric—staff size, user base, traffic, and so forth. This would allow others to understand how I got the final numbers, and, if necessary, question my assumptions.

A factor of ten in either direction, however, was a lot of variance. Sure enough, my model broke pretty badly: If I had significantly overestimated some assumptions, we’d end up throwing a lot of money away on tools that weren’t necessary, and, if I had made a mistake on the other side of the line, we would invest on items that would end up having to be replaced almost immediately.

And so back I went to the drawing board, and came up with a third budget that finally passed muster. In the end, I had neither used up ten times the money, nor dramatically overestimated our needs. The official budget was only modestly over my initial estimate, but radically different in approach and substance. Most importantly, Adam and I had reached a very high level of alignment over the allocation of the expenses, and we both had a lot more confidence in our estimates, because we knew they could withstand a lot of error.

Think today, even if you won’t act tomorrow

When faced with a decision, most people tend to focus exclusively on the problem in front of them: Will I get enough money? Will this tool do what we need today? These questions are obviously important, but they tend to make the decision tactical in nature.

Asking (and answering!) what you would do if you had a lot more agency, or if your assumptions turned out to be drastically different from reality, is a great way to position your decisions in a larger strategic context that makes questioning and validating them easier.

This approach becomes particularly important for decisions that are hard to reverse, but it really improves the quality of even smaller commitments. We now use some form of it as part of our overall decision-making process, and it’s turned out to be an invaluable tool.

  1. There are, of course, ways around this problem—you can simply ask for a lot more resources than you need, but that’s a really terrible way to work. ↩︎

  2. In many organizations, asking for less money would be considered a mistake, because “budget equals power.” Thankfully, that’s not the kind of games we play at Noom. ↩︎