Explore, Exploit, and XNPV
I’m not fishing for compliments, but it’s hard work to write everyday (except on weekends and when I arbitrarily decide to take two weeks off for spring break). And it’s not so much the writing that’s the hard part, but rather the generating of ideas to write about. Of course, that was the whole point when I started doing this: I challenged myself to find something interesting to say everyday.
And again, not fishing for compliments, but based on the responses I’ve received from you all to the things I’ve said everyday (except on weekends and when I arbitrarily decide to take two weeks off for spring break), I think that’s mostly been the case. But I can’t take all of the credit for that because along the way I discovered a hack for being able to say something interesting everyday, and that’s to respond to something interesting said to me. That’s why so many of these start with prompts from you.
With that as background, here’s what I heard back from Daniel after I wrote about hunting for mushrooms(!) in a business-like manner: “This reminds me of the explore-exploit paradigm in computer science. Great post.”
Now, did I include “Great post” in the quote there because I am fishing for compliments? Maybe, but more importantly, explore-exploit! I vaguely recognized that terminology, but it had been a long time since I had heard it and I have zero computer science background, so I looked it up. Here’s what I found on Wikipedia:
The exploration-exploitation dilemma, also known as the explore-exploit tradeoff, is a fundamental concept in decision-making that arises in many domains. It is depicted as the balancing act between two opposing strategies. Exploitation involves choosing the best option based on current knowledge of the system (which may be incomplete or misleading), while exploration involves trying out new options that may lead to better outcomes in the future at the expense of an exploitation opportunity. Finding the optimal balance between these two strategies is a crucial challenge in many decision-making problems whose goal is to maximize long-term benefits.
I feel seen.
If you want to be crass, I think you can reduce a lot of business, and perhaps the world, to the explore-exploit paradigm. Or as I say, because I live in the world of spreadsheets and not computer science, everything is a present value-future value problem (shoutout XNPV). But a crucial nuance that explore-exploit calls out, that present value-future value doesn’t, is that when making a decision, your current knowledge of the system may be incomplete or misleading. But “may be” may be being generous there. That’s because it may be the case that when making a decision, your current knowledge of the system is incomplete or misleading.
I say that because after I wrote about your colleagues having an outdated perception of you, Brent wrote me back and said simply “Perception is a lagging indicator for all things.”
And I said, “If that’s true, then perceptions are always wrong, which is humbling.”
To which he said, “Yessir.”
And while I am tempted to end it right there, the point is, and this is a recurring theme this season, that you or the world is always moving on, so you will never have or have processed the information you need to ever make a bullet-proof decision about what to do next in business or anything else. So explore as you exploit, but also exploit as you explore, and thank you to Daniel for bringing that to my attention.
-Tim
