Reasonable > Rational
Morgan Housel’s book “The Psychology of Money” has been on my list to read for a while.
Last Saturday, I started listening while taking my dog Logan for a walk.
And every few minutes, I stopped to make a bookmark.
Because though his book is about the psychology and the stories about money, every story could be translated to the psychology and the stories about business. Because nothing about business is purely rational, market-driven, and efficient, no matter what we’re told.
Every decision we make about business is informed by our risk tolerance, our time horizon, our previous experience with “business”, our role models, our goals, our money and investment and education stories. Every decision is informed the the success (or not) of previous decisions we’ve made, our place within the macro-economic environment, our proximity to social norms of power.
So how can we not consider the psychology of our service-based businesses, especially when they are so personal to us?
Reasonable versus rational
With it comes something that often goes overlooked: Do not aim to be coldly rational when making financial decisions. Aim to just be pretty reasonable. Reasonable is more realistic and you have a better chance of sticking with it for the long run, which is what matters most when managing money. - Morgan Housel
We’re pummeled with advice on how to maximize our results in business, from a series of “experts”.
And as you expect, the rational advice is all generally the same.
Consistently raise your prices, because if the value’s there they will figure out how to pay
Post at a specific frequency and format based on the algorithm, comment in this way, and re-tweet (re-X??) at specific times.
Have a weekly newsletter or podcast (because weekly is the gold standard for growth)
Once you hit your 1:1 capacity ceiling, start hiring additional team members or forming groups/courses or otherwise find ways to de-couple your revenue from your time
Don’t keep doing manual tasks in your business - hire them out to an assistant
And this advice is useful in generalities, as many entrepreneurs do need to raise their prices, get help on tasks they aren’t great at, communicate with their audience on a consistent basis, and build resilience into their business.
But what’s coldly rational for “business” just might not align for you, based on what you’re building, why you’re building it, and the capacity you have in your own life.
And as a business and operations advisor… I don’t follow some of this advice - even if I provide this to some of my clients! Because my goals may not align to these rational growth objectives and my background is different.
It would be rational for me to charge for my free monthly classes (as my client Jenny says in her newsletter, my “totally-free-but-seriously-why-are-you-giving-all-this-knowledge-away monthly Deeper Business Dialogue”), but core to my mission is dismantling the ivory tower and the paywall-gated secrets of business building. I see other business mentors charging for these types of workshops, but I know they have different financial requirements for their lives and a different tenure in business. I don't have children, I have a spouse who has a W-2 job that provides for our health insurance, and I have a retirement portfolio from my previous corporate experience.
So yes, I want to cover my costs of living, but my costs are lower than many and I’m not trying to optimize for profit at this stage of my life and business.
What’s rational, and what every business advisor I hire tells me, is that I should move up the business growth ladder and start working with businesses that can invest in high-end consulting and advisory, where I don’t need to “do” as much in their business. But I don’t want to! I have started to acknowledge my love of teaching about business building, even though I know that building a creator business is a much tougher road than doing high-end consulting. And the businesses I work hands-on with actually need someone to work hands-on in the business.
Am I leaving money on the table? Probably. Am I working too much? Probably. Do I love it? Yes I do.
What’s rational is for me to hire an assistant to free up my time. But I’m a detail-oriented operations lover. There’s less to delegate to an assistant, because I automate a fair amount, and I want to handle most emails that come in to my inbox. Sure, I might not be rational with my time, doing $10 tasks that in theory could be delegated. But it’s reasonable for me.
Embracing the technically imperfect
But if lacking emotions about your strategy or the stocks you own increases the odds you’ll walk away from them when they become difficult, what looks like rational thinking becomes a liability. The reasonable investors who love their technically imperfect strategies have an edge, because they’re more likely to stick with those strategies. - Morgan Housel
In Housel’s book, he discusses having more cash in his portfolio than is advised, because he is prioritizing liquidity and optionality. He discusses that the psychology of following “rational strategies” might be hell on the nervous system and can cause you to walk away when times get tough in the market.
We can bring this into our businesses.
What are your goals? Is growth according to the ‘optimal’ rules what you’re aiming for?
What are your priorities in this season of your life?
What is your capacity? Where can being technically imperfect be the right move for someone whose life keeps life-ing?
What are your values? Where do you back off of maximizing your situation in order to benefit the broader collective? ALTHOUGH LET ME BE CLEAR. If you are not SUSTAINING yourself, we have to get there first, because “if the feminist in the business isn’t thriving, it’s not a feminist business” (h/t Kelly Diels)
Where are you full of resources, and where are your gaps? How is that different than who the ‘rational advice’ is geared towards?
Quoting my friend Amelia Hruby:
If your goal is to have a huge, viral show that tops the podcast charts & gets a six-figure Squarespace sponsorship, then you need to play by the pod-industry playbook.
That means releasing weekly episodes and constantly asking for reviews and making perfectly-press-playable content on repeat. It’s grueling, exhausting & hopefully pays off with a nice network deal and some $$$$ in the long run.
But if you’re a small business owner, those probably aren’t your goals!
I bet you want a podcast that will speak directly to your community, bring in some new clients, and give you something to talk about in your emails & on social & everywhere else all month long. And that means, you don’t have to play by the industry rules!
You can define the strategies that are ‘technically imperfect’ - but much more reasonable for you in the face of your life.
If rational is sending a newsletter every week with a standard format… reasonable might be less frequently and maybe varying up the content type, sprinkling in audio, video, or something else based on your creativity.
If rational is a weekly podcast to grow downloads and top the podcast charts… reasonable might be monthly. Because the goal might be, as Amelia says “to make meaningful episodes that are deeply resonant with your community and intentionally integrated with your sales calendar. All based on creating just one piece of powerful audio per month.”
If rational is increasing your prices to the point where you start to get squirmy on offering your work.… reasonable might be taking longer to build up to that point so you have more reps in. Or to not go there at all, as long as you can make a portfolio of an offer suite that honors your financial needs and your working capacity.
If rational is daily posting with the optimal mix of video, carousels, and text content… reasonable might simply be spending time with your friends online or ditching social media altogether because you’re building a business that’s not a creator biz.
Let’s embrace reasonable over rational, technically imperfect over likely to burn you out.