Working the Barbell Strategy into Enterprise Development

The barbell strategy is an investment strategy that advocates splitting your portfolio between extremely safe assets such as treasury bonds and extremely speculative but diversified assets with high risk/high reward potential. The idea is that the safe assets will not grow much but ensure that you have a solid base and the diversified speculative assets will provide multiple orders of magnitude pay off when the market endures unexpected changes. How is that related to software development?

It turns out that this strategy is very relevant and applies to big companies that dominate their main market — think Apple, Facebook, Google, Microsoft, etc. All these companies want to succeed and grow even more. But, how? Google has the search market cornered. Facebook is on a fast trajectory to have every human being (as well as some pets) on Facebook. The barbell strategy is perfect for such companies. They’ll keep developing and strengthening their grip on their bread and butter markets, but will also go way outside their comfort zone. Alphabet – the umbrella company that used to be Google is the most prominent example. They have the moonshots concept that is the analogue of the extremely diversified speculative assets, but now they actually form individual companies to drive those ideas, while separating them from the Google cash cow. Other big companies have followed suit. Facebook is seriously into virtual reality. Microsoft, which used to be a pure software company, expanded its spectrum successfully into gaming consoles with the Xbox and into tablets with the surface pro. Apple is rumored to be venturing into self-driving cars.

This is great news for innovation because many amazing ideas falter and disappear due to lack of resources or immediate business applications. Having large corporations support these types of projects increases the likelihood that the right ideas will make it.

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