Compound Down to a Risk You Can Live With

Compound Down to a Risk You Can Live With

I used to think you could solve any problem completely.

Find the answer. Apply it. Done.

Early in my career, I learned that wasn't true. Not every problem needs — or has the budget or the readiness for — a 100% solution.

I didn't want to believe that at first. It felt like giving up.

It isn't. It's how the actual math works.

Someone who worked on the Strategic Defense Initiative — the missile shield program in the 80s — once explained it to me this way: you cannot intercept 100% of incoming missiles in a single pass. Not for any amount of money. So the system was never designed to. First tier stops roughly 80% of what's coming. Next tier stops roughly 80% of what's left. Then the next. You don't solve for zero. You compound down to a risk you can live with.

He told me the Soviet economy collapsed trying to do the opposite — hunting every risk to zero in one attempt. There isn't enough money on the planet for that.

I teach this now in every company I walk into. Find the 20% of causes producing 80% of the result. Fix that. Then stop treating the remaining 20% as leftover — run the same analysis on it. It has its own 80/20 inside it. And so does what's left after that.

Do the math on that. Start with 100% of a problem. First pass takes it to 20%. Run the same cut again — down to 4%. Again — under 1%. Three passes. From the whole problem to almost nothing.

Most people stop after the first pass and call it solved. That's 20% of the original problem still sitting there — waiting, getting more expensive the longer it waits.

When was the last time you tried to solve something completely — and what did it actually cost you?

Dominic Luzi · Chief Answer Grape, Management Alchemy

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