This economics inspired framework asks us to answer and act upon a hard question: where are we differentially better than others?
What’s Comparative Advantage at Work?
The 1-sentence summary is that in the context of a work environment, we should focus our time on activities where our abilities are meaningfully better than our colleagues. Not on activities where we’re just better, on activities where the relative performance gap is greatest.
Many of us probably remember reading about comparative advantage in Intro to Economics, learning about Italian economist David Ricardo’s theory from the early 1800s in the context of global economies. [If you’re far more hardcore than we are, here’s the 1821 publication to read the original source]. The core of his theory is it’s the relative gap in performance - or comparative advantage - that matters.
- For example, if a country is 20% better at producing Good A than another country but 40% better at producing Good B than that country, its greater comparative advantage is in Good B, and it should produce Good B and import Good A.
- Using the same example in a work setting, if a CEO is 20% better at sales than anybody else at her company but 40% better at product, she should spend her time on product (and probably hire a better product team!).
I (James) was first introduced to it in a work context in this article by Venture Capitalist Jeff Bussgang. Included in it is this memorable quote that refers to founders but is also more broadly applicable:
”I'm no David Ricardo, but it seems to me that if entrepreneurs followed this "law", the gains to their start-ups would be akin to the gains attributed to free trade. Here's why: founders are typically gifted, multi-talented, versatile professionals. As such, they get sucked into spending time doing things that they may be better at than the others in their organization on an absolute basis, but that, comparatively speaking, they are worse at in relation to the handful of things that they are uniquely suited for.”
Here’s some Mayhall Magic poking fun at our digital assistant friends:
When to Use Comparative Advantage at Work?
The clearest example is how we spend our own time. As we think about our day, week, or even year, are we working on activities that play to our strengths relative to alternative options. Since we’re having fun in Econ 101 today, where the opportunity cost of our time is least.
Comparative Advantage at Work can equally apply with helping others to prioritize their activities. Perhaps our CEO is trying to micro-manage the details of our business when in reality she’s a strategic visionary whose operational chops aren’t nearly as strong as her storytelling abilities.
How do we use Comparative Advantage at Work?
James:
The original article by Jeff Bussgang here is in my Top 5 for articles I’ve shared with the most people over the years. I read it and it immediately changed how I view the world, not only for where I invest my time, but also for how I observe others spending their time. I’ve used it a fair amount with my teams to ensure we’re taking advantage of where they truly excel.
How comparative advantage can apply to career trajectories is fascinating to me. On several occasions, I’ve seen somebody absolutely crush a role - perhaps an IC role or Manager role - where they’re head and shoulders above anybody else. They’re then promoted to being a Director or VP and they’re just another strong performer, no longer even outperforming. If the company is getting greater overall value from a B-grade Director than an A+-grade IC, this tradeoff makes sense, but I’ve seen several cases where the corporate ladder structure failed, and both the company and the individual would have been better off without the promotion. In my experience, it’s most common when 10X salespeople or engineers go into management, and their previous comparative advantage dulls quickly.
John:
My former colleague and friend, Peter Finter, often talked about a 2x2 of “things you’re good at and bad at vs things you like doing and don’t like doing.” I found it helpful to have an honest self-assessment with these dimensions in mind. It’s important to spend time in a job where our comparative advantage is the things we like doing and are good at. It’s also a reality that we spend too much time in the “things we like doing” column while neglecting our comparative advantage. My gut tells me we should be spending about 30% of our time doing things we’re good at but don’t like doing. Managing these variables during a career change is a topic worthy of another Blueprint altogether.
James:
Connected to your 30% estimate, I liked Jeff Bussgang’s recommendation to track our calendar and then use this Comparative Advantage at Work lens to analyze where we’re investing our time. One practice that I adopted in my last 2 years at LinkedIn that partially connects to this topic is I almost entirely stopped checking email. I reasoned that I wasn’t especially good at it and my time was better spent elsewhere. Perhaps as macro advice, if we’re spending 2 or 3 hours a day doing email, perhaps that robbing us of time where we can invest in where we have a comparative advantage?
Finally, I think AI is highly relevant to this concept. As the gap between our output and AI’s output shrinks, it’s on all of us to figure out where we need to do the work ourselves vs rely on AI to undertake a task and produce output that is 80% of our quality in 0.1% of the time. More and more, the answer will be to ask AI to perform the tasks. And then in a few years, the dynamic will reverse and the AI will have to figure out when they want us as humans to actually perform an activity ;)
John:
When AI can do all our video-editing, I’m happy to hand over ever bit of it!
As a final thought, when we created Blueprints, I remember having a conversation about what the world needs from us despite a ton of frameworky content out there already. It came down to a few elements that I felt we could do differentially well: storytelling, perspective and humor (humour if James were writing it). There are substitutes for Blueprints on other dimensions and even these dimensions, but I’d like to think our comparative advantage in the content market is delivering in the bullseye intersection of all three of these elements.
Want to learn more?
WANT TO GO DEEPER ON COMPARATIVE ADVANTAGE?
Here’s a good economics-focused read - with Michael Jordan as part of the example - with enough “Additional Readings” for the most devoted economist:
WANT TO GO DEEPER ON PRIORITIZATION AND TIME MANAGEMENT?
Although they’re a bit more macro in nature than daily time management, we’re both huge fans of these Blueprints that dig into prioritization:
The Priority Matrix (PMAT) with LinkedIn COO Dan Shapero.
Jeff Bezos’s 1-Way vs 2-Way Doors.
Although it’s aimed at tech CEOs, this is an excellent book on where to best invest our time:
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