The home run is one of the most exciting events in sports. With one swing you can score the most runs possible. Even propel your team to victory. No other play in baseball comes close to having such a big effect on the game.
Yet while home runs are great, relying solely on them is dangerous. In professional baseball, players get a hit about one third of the time. Home runs only make up one tenth of those hits. That means as a pro, you've got a 3% chance of hitting it over the fence whenever you step up to the plate. Not exactly the best odds.
Swinging for a home run is risky. And baseball managers know you can't win if your strategy is just to try and hit it big every time. Sometimes setting yourself up for success means hitting some bunts and base hits along the way.
In life, opportunities are similar. Base hit opportunities have lower reward but are lower risk, while home run opportunities have a big payoff but higher risk.
Here's an example. My wife and I think differently about money. Her focus leans more toward base hit opportunities like tracking our spending habits and setting up financial plans. She's even switched our bank account multiple times a year to get better rates.
On the other hand, my focus is on home run opportunities. I look for ways we can create big financial gains--like starting a company--where if it pays off, we won't have to worry which bank we're with.
Our differences created tension at first. But eventually we realized our approaches were a perfect balance.
Without my wife, I would never have paid back $40k in student loans in less than two years. And without me, we may not have started a company that now supports us and many other people.
It's this balance that's the key. Alone, my wife may have saved some money and I may have started a company. But together, we have an optimal mindset to pay off debt while taking on long-term opportunities for financial and personal freedom.
"Managing a portfolio as a collection of risk-reward ratios leads to superior returns. Make sure to have a mixture of low reward, low risk and high reward, high risk projects at work and in life."
You're most dangerous when you're balanced.
How to apply base hits and home runs to your life
This 'base hit and home run' philosophy doesn't just apply to money. It can be applied to anything from growing your company to your daily to-do list.
To grow your company, it could mean building a risky feature that could create big growth while writing blog posts that help build your brand slowly, yet reliably.
To develop your personal skills, it could be having a job during the day while learning to code at night.
As a CEO, every morning I focus on a long-term, home run project, like coming up with our product strategy for the next year. My afternoons meanwhile are typically focused on more base hit priorities like answering emails.
If you feel you don't have the stability to do any home run thinking today, then hit your base hits until you've opened up time. You may have to focus only on base hits for a while. Get roommates to lower your rent, don't eat out, or swap 1-hour of watching TV for working on your home run opportunity.
You don't have to make a big thing of it. Get to the point where you have enough to give an hour a day to your home run idea. You'll be surprised how far you can get with an hour a day.
By approaching life with a balance between base hits and home runs, you decrease the risk associated with success while increasing your chances to win big.