Graduate school was good for me on many fronts. I had a welcome break from the grind of work. I added a credential that helped my career. I even met my future wife!
And I actually learned some stuff too. My professors were brilliant, I was diving deep into new subjects, and I was experiencing the “case method” of instruction for the first time.
One of my best classes was an operations strategy course. It was quite advanced, and I remember being a bit overwhelmed. The professor was a very nice and patient guy, but I have a sneaking suspicion he was way smarter than me. It was a battle every class just to keep my head above water.
On our first case (if memory serves), we had to figure out a company’s best strategy to make its stuff. Should they build huge plants with high fixed costs and long production runs but lower overall unit costs, or smaller ones that were more flexible but had higher unit costs? We spun our wheels trying to figure it out, until the professor patted us gently on the head and told us the answer. It turns out the best approach was to use a tailored solution – a combination of a large and a small plant to optimize costs and flexibility. Like many a case, it made a lot more sense after he explained it.
Every subsequent case followed the same script. No matter what area of operations we touched, a tailored solution was the answer. After a few of these (and apparently amused by our struggles), the professor said words that stayed with me: “The tailored solution is always right.”
Our final case was a monster. Every student was struggling through the details, and we were all a bit numb as we stumbled to the finish line of a very rigorous course.
When we started discussing the case in class, the professor asked us if we knew the optimal solution. Every student suddenly found something interesting to stare at on the floor. Except one!
I raised my hand high, and the professor, though a bit surprised at my bold confidence, called on me. “Yes, what is the best approach?”
In a powerful, measured tone, I told him, “The tailored solution!”
There was a long pause. All of my fellow students looked at me in anticipation. The professor leaned forward and raised his eyebrows, encouraging me to go on. I met his gaze, and gradually, a smile slowly formed on his face. He realized I had no clue what the solution was. To confirm, he said, “Yes, that is correct. And do you know what the tailored solution would be here?”
I said, “No sir, unfortunately I don’t.” My professor laughed and nodded with some satisfaction; even if I wasn’t clever enough to crack the case, he seemed pleased that I had fully embraced the core tenet of his class. One of my finest academic hours 🙂
Thankfully, most of life is far easier than the cases from that operations strategy class. And while I’ve forgotten most of that coursework, the key lesson has stuck with me.
A tailored solution will optimize every available input and, as a result, will almost always land “somewhere in the middle”.
Consider dining. If you were a great cook with lots of time on your hands so cooked every single meal at home, the first meal you ate out would be a wonderful and new experience. Similarly, if you were made of money and could afford to eat out every meal, it’d still be special (if only for humor & novelty) to make your first meal at home. The benefit of moving at least one step away from an extreme solution will always be worth it.
That’s not to say that people actually use a tailored solution (I’m looking at you, neighbors who eat out literally every meal…). It’s just saying the tailored solution is always right 🙂
- Should I eat out or cook at home? Yes.
- Should I work on maximizing income, or tightly controlling expenses? Both, in good measure.
- Should I invest my time with my work, my spouse, my kids, or my friends? All of the above.
- Should my kids prioritize academics, sports / activities, or happiness / social lives? Sure!
- Should I save for retirement, my kids’ education, or my next vacation? Pick three.
- Should I invest or pay down debt? Should I save in pre-tax or after-tax accounts? Should I buy stocks, or bonds, or real estate? Yes!
The best strategy will always be custom to the individual, but it’s rare indeed for the optimal solution to be at one of the poles. The marginal benefit of that first step toward a middle, tailored solution will almost always be greater than its marginal cost.
It is tempting to drift to an extreme. People with demanding jobs decide that family and other commitments will have to wait. When time is short, it’s easy to justify the expense (and unhealthiness…) of eating out / ordering in every meal. Home cooking’s advantage in cost and health can make it hard to enjoy a restaurant meal. It’s easy to worry so much about your child’s future that you forget they need to enjoy life right now. High salaried folks can’t be bothered to watch expenses or do anything other than earn, and the frugal are too busy cutting costs to earn more lucrative income.
It’s easy to drift to an extreme. It’s easy, especially for folks who deal in absolutes, to defend that choice. But it’s never optimal. The tailored solution is always right.