Generalize, Specialize, Minimize Tails

The culture of business comes with some strong, polarizing beliefs.

“You must maximize your revenue, any way you can.”
“It’s a game, there are winners and there are losers.”
“Attention spans are at the lowest they’ve ever been.”
“It’s a cut-throat market.”
“You should specialize.”
“No. You should generalize.”

Reality is the ultimate judge, and if you want to see clearly, shorthand beliefs are one way to go.

Those beliefs aren’t wrong. They’re an effort to put into words the nature of reality, to hint at the consequences of your choices when nothing is given you for free.

So let’s add new words to describe your choices.

Take those last two beliefs, this broad choice you face as a freelancer: should you generalize, or should you specialize? Should you go shallow on multiple fronts and offer integration wisdom as your offering? Or should you go deep in one area and say no to all the other alternatives? Should you mix approaches and specialize on two or three fronts?

Let’s introduce these new words: tails, tail risks and fat tails.

By tails, we mean the idea that on a graph showing the odds of something happening, we might find that there are edges to the expected bell curve (the normal distribution) that go further out than we expected. By tail risks, we mean the idea that in those extremes there are lurking scary scenarios that don’t amount to zero. And when we talk about fat tails, we talk about odds that skyrocket in the regions of a graph that aren’t supposed to contain high probabilities, but because reality is dynamic and some mechanisms are viral in nature, low probability events turn into nightmares.

Which scenario, specialization or generalization, contains fewer chances of extreme risks? Which scenario risks losing your ability to get more clients when things change, or completely losing your reputation when you make a mistake?

Those, in the end, are the real questions for our discernment. See, a mix of generalization and specialization might in practice work out, and the more important thing is to avoid tail risks, whichever approach you choose. We couldn’t have seen it this way unless we had used these new words.

The simplistic words that describe reality, like generalization and specialization, like cut-throat, like winners and losers and like maximizing revenue, they might be handy and useful, but your gut tells you there might be words that you’re missing.

So here’s a new belief for us:
“Better words help us see reality more clearly.”