Delegating is hard. Getting someone else to do something instead of doing it yourself… there are a whole bunch of psychological, practical, economic and other issues to navigate when doing that sort of thing. There is definitely a point where you have to either accept that your company will never grow, or start delegating. I’m definitely there right now. If I wasn’t a workaholic, I’d have reached it 2 years ago.

So right now I’m in the situation where when I see something that I can possibly delegate, I jump at it. I guess when I say delegate, I mean outsource. Ideally, I’d have full time employees, but I don’t need an artist, or a web developer, or game designer or ad-manager or PR person. I need a little bit of all of them. Thats hard to find. As a result I end up employing a ton of people on short term piece-work contracts. Right now 3 people are working for me, a designer, a web developer and an artist. Oh and a trailer-producer, so that’s 4. The trouble is, it *always* involves some admin and management (I insist on a countersigned contract even if its $100 of work), and also it’s never 100% like you doing it yourself.

But I did recently come to a bit of a revelation. The fact that I could get the results I wanted quicker with me doing it, is irrelevant. It becomes a question of RELATIVE efficiency and not absolute. This is a bit of a mental trick, and it’s probably the one thing I recall from my economics degree, but check this out: (from wikipedia)

Comparative advantage

In economics, comparative advantage refers to the ability of a party to produce a particular good or service at a lower marginal and opportunity cost over another. Even if one country is more efficient in the production of all goods (absolute advantage in all goods) than the other, both countries will still gain by trading with each other, as long as they have different relative efficiencies.

On the surface it sounds like nonsense. If I can make bananas cheaper than you, and tractors cheaper than you too, why on earth would I trade bananas and tractors with you? Read the article if it isn’t obvious, it’s kinda magical.

There is a difference between reading that and really internalizing it. What it comes down to is this: If you can’t find an artist as efficient as you, or can’t find a designer as quick as you… it really doesn’t matter. It probably STILL makes sense for you to outsource. You aren’t paying someone to do a job more efficiently than you (of course that would be awesome) you are paying someone to do a job *so you can do something else*. Clearly, the solution is to make the *something else* the stuff that can never be outsourced.

I bet I’m explaining it badly, but I know what I mean! It’s a revelation to me. I suspect it also acts as a barrier to expansion for some small companies.

5 Responses to “Delegating and outsourcing as a study in comparative advantage”

  1. Joel Lamotte says:

    You explain it well enough but only at the very end. I got it once you say that the point is to let you do something else meanwhile, not to get the best result.

  2. Steve Smith says:

    Maybe you should extend your metaphor to say “but I produce tractors more efficiently than bananas, so I’ll spend all my time making tractors and trade them for bananas.”

  3. Michael says:

    If it ain’t broke, don’t fix it!

  4. stavro375 says:

    @SteveSmith
    Yeah, that seems to be the key. Even if country A can make everything cheaper than country B, it has a finite amount of labor to make things with — and country A can “spend” its labor most productively by focusing on what it can produce cheapest, and importing everything else. Cliffski’s point seems to be that even if he can make trailers and websites fastest on his own, doing so takes time that could be better spent managing outsourced projects. (EG, if it takes Cliffksi 3 days and 72 cliffski-hours to make a trailer himself, he still has an incentive to spend 10 cliffski-hours outsourcing trailer-making, even if the finished product won’t arrive for another week.)

  5. Bram Stolk says:

    So to summarize:
    If you are an expert video editor, but you are also the nr 1 music composer in the world, you should still hire someone to edit your music videos, despite being an expert at it.