## ...But Their Overhead Was Low

There are probably too many TED talks on this page,
but [here's another one anyway](http://www.ted.com/talks/dan_pallotta_the_way_we_think_about_charity_is_dead_wrong?language=en).
This talk is worth watching or reading, from start to finish.
I think Dan makes two great points in this talk that apply not just to non-profits,
and not just to businesses, but to any endeavor worth doing:

+ "They kept overheads low" is a crappy substitute for "They maximized impact"
+ The "penance" mindset is holding non-profits (but I'll extend that to all of us) back

We'll save the second point for a later blog post, as interesting as it is.
For this post, let's focus on the idea of pies.

I've often heard the adage "You're only worth as much as your margins." And, to be fair,
I like the quote. It's a good reminder not to judge your success according to funding,
or hype, or buzz, or users, or what-have-you, at the expense of judging success according
to something like revenue. *However* (and it's a big 'however'): that phrase or its
equivalents are usually whipped out when arguing against some kind of expense.
This is especially true amongst people in charge,
especially when those people in charge are not armed with economics degrees.
The idea that many leaders take from that phrase is that expenses are bad.
Costs should tend to be reduced.
Overhead should be *low*. And that sounds great on the surface. Some people's entire roles
within companies are on the optimization side, looking at current practices and determining where
cost-cutting improvements can be made.

The trouble really starts when people combine the above aphorism with the idea that pies don't get bigger.
Obviously I'm talking about metaphorical pies here... the pie that means "market" or "sales" or "gross receipts."
If you're under the impression that you're only as good as your margins,
you don't have a good understanding of the way those things really work.
Metaphorical pies get bigger *all the time*. In fact, if you think your pie
isn't getting bigger, you're either:

+ eating at the wrong pie tin, or...
+ not investing in enough pie-makers

Pie-makers here are the people, ideas, or things that grow a market.
They're the folks that add value to an economy and the ideas that create their own demand.
Pie-makers are the things that make an ecosystem (and a business) grow,
rather than extracting value through optimization.

Pie-makers cost money. Sometimes, pie-makers cost a higher proportion
of gross than they did when you started. In mature markets,
pie-maker costs can consume almost all of the pie, if you're looking at percentages.

Luckily, though, percentages don't pay the bills. Nobody cares (or should care) if you're investing
99% of your profits into things that will grow the pie, as long as the pie growth per dollar
spent adds more than that dollar spent to your take-home.
To put it another way: if it takes $1 billion to make $10 million in profits,
it's better to do that than to spend $1 million to make $5 million in profits
(assuming that the risk is equal). The "margins" that determine your worth aren't percentages,
but dollar amounts*.

So this is not to say "ignore frugality", but don't be afraid of spending money because of the
number of digits. As long as you're confident that you're going to get a positive return
on that dollar, even if it's only a penny, you should be spending that dollar.

You wouldn't want your idea's epitaph to read "great idea, and the overhead was low."

*I should mention at this point that you can actually replace dollars with any metric of
success that you'd like. Whether that's dollars earned through sales, dollars donated
to a worthy cause, individuals helped by your organization,
or warm-fuzzies from friends and family. Whatever's on your bottom line, though,
maximize it! Aim for a bigger pie, not (just) a smaller overhead.