Originally published on LinkedIn on July 7, 2023.
During the dotcom boom in the 1990s, I worked for a VC-funded internet startup. We ran on “web time” and took a move-fast-and-break-things approach.
After a few months on the job, I realized that the startup’s leadership team would pay nearly anything if it meant we could ship faster. This came as a huge surprise. My previous company had Mercedes ambitions on a Kia budget. Although the executive team at that previous company pushed us to go fast, they questioned every expense. When I balked at their scrutiny and at what I viewed as penny-wise, pound-foolish decisions, they told me: “It’s your job to figure out how to do more with less.” So I learned how to be scrappy.
Both companies wanted speed. Both would describe themselves as “fast-paced.” But at the first company, my team had to live within a “fixed envelope.” If I spent more money in one place, there was less to spend elsewhere. It was all a giant zero-sum game. At the second company, the dotcom startup, we existed in an “expanding universe.” There were no hard decisions about budget tradeoffs: everything was an “and.” We could spend money outsourcing effort AND build out our own test lab. Hire more people AND buy tools. If we spent all the money we had, it was OK: the board could always get more. (This was the height of the dotcom bubble, and there was too much money chasing too few good ideas. The board had good reason to believe they could always find more money.)
Instead of being scrappy and holding tight to the purse strings, I had to learn how use money as an accelerant.
Since then, I have successfully led in both expanding universes and fixed envelopes. Managing looks very different in the two contexts. It boils down to a simple guideline: If you’re in a fixed envelope, money is a constraint. If you’re in an expanding universe, money is a lever.
Although it’s easy to describe the difference, the implications are huge. It takes practice to make the mindset shift.
You can take more and bigger risks in an expanding universe. You can give individuals and teams autonomy to experiment and explore freely. In a fixed envelope a single big failed initiative can burn through all your budget, so you have to think in small bets, be disciplined about forming clear hypotheses, put up guardrails around how long to continue any given experiment, and measure the return from those experiments diligently.
In an expanding universe you can focus on opportunities. In a fixed envelope you have to think in terms of governance.
It’s not always obvious which context you’re operating in. I’ve been at companies where my boss told me to spend freely, but then yanked the rug out from under me. You can’t necessarily look to your peers for guidance either: one division can be in an expanding universe while another is in a fixed envelope. Further, circumstances can change from month-to-month or even week-to-week depending on the company’s financial situation.
Many organizations are going through such a change right now.
Although parts of the tech industry are growing (hello, AI), much of tech is in a hiring freeze or laying people off. As of this writing, Layoffs.fyi reports that 837 tech companies have laid off 216,328 people in 2023.
If you are making the shift from an expanding universe to a fixed envelope, it’s a painful transition. You have my sympathy. The good news is that if you can learn how to operate effectively in a fixed envelope, you can be extremely effective in an expanding universe. You just have to know which one you are in.