EP17: The Trichotomy of Returns with Nic Peterson

“One of the keys to becoming wildly more productive is
understanding the concept of the trichotomy of
returns.”

Nic Peterson (2:49 - 2:54)


Learn to be efficient with your resources as your
business grows.



When your business starts growing, your decisions become more
critical. Ideally, you want to minimize your input for a specific
return. To make decisions that enable you to maximize your
output, you need to grasp the concept of the Trichotomy of
Returns.


“When making a decision, you have to decide if the expected
return is worth your time, and how it affects your business
overall.” 


- Nic Peterson (5:53 - 5:59)


Everything you do should go into three different buckets,
depending on the return you’re expecting, and the amount of work
or resources you think it will entail. 


The three buckets in the Trichotomy of Returns.


Disproportionate Returns - The things you do
where the returns aren’t proportionate to the resources. The
output can be either favorable or unfavorable. Maybe you put in
twice the work and get four times the returns. Or you could 10x
your investment and only get marginal benefits.


An example of a favorable return is working overtime beyond a
certain point. Your hourly return is disproportionately higher
when compared to your benefit each regular hour. 


Proportionate Returns - This is where your
results scale proportionately according to the effort or
investment you put in. A good example is the case of an hourly
employee. If you work double the hours, you’ll make twice the
money (barring any overtime, of course). 


Proportionate returns rarely happen in business. If you double
your ad spend, very seldom will your revenue double
precisely. 


Binary Returns - This one is simple. You either
get a result, or you don’t. It’s like a light switch. If you
switch it on, you’ll have light. If you hit the switch harder,
you’re not going to have more light. It becomes problematic in
business when the switch is already on, but we keep pushing
harder because we aren’t getting more in return. This is
typically also where we have the most room to save time money and
energy.


“The concept of trichotomy of returns is really something to
think about because if you put it into practice and apply it to
your decisions, you really are going to be a lot more
productive.” - Timothy Dick (7:52 - 8:06)


If you can learn to discern between which bucket your decision
falls into, you’re going to become a lot more productive.
Remember, unfavorable returns are still returns, and it’s your
job to decide if those results are the best use of your
resources.


How to get involvedIf you
would like more information about Timothy Dick, and the success
businesses have gained through work with him, please visit his
website.

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