We all want to be productive and successful in our endeavors, but sometimes we end up wasting our time and energy on the wrong things. We focus on the details instead of the big picture, or we get distracted by the flashy and complex instead of the simple and essential. We solve the wrong problem.

In this blog post, I will share some examples of how people fall into this trap and how to avoid it. Whether you are an investor, a business owner, a parent, or just someone who wants to improve your life, you need to ask yourself: are you solving the right problem?

The Election Trade Gone Wrong

One of the most fascinating stories I have heard is about a group of traders who tried to profit from the 2016 U.S. Presidential election. They worked at Jane Street Capital, a prestigious trading firm, and they had a brilliant idea: they would get the election results faster than anyone else and use them to trade U.S. stocks.

They hired a team of analysts who monitored the state-level results and reported them to the traders. They managed to get the information sometimes minutes before the mainstream media outlets. They knew that Trump was going to win before anyone else.

But, there was a catch. They bet against U.S. stocks, thinking that a Trump victory would cause a market crash. They were wrong. The market initially dropped, but then rallied and erased their profits. They ended up losing $300 million on their trade, the worst in the firm’s history.

What went wrong? They focused too much on getting the information and not enough on how to use it. They solved the wrong problem.

The Portfolio Optimization Mistake

I made a similar mistake early in my career. I was obsessed with optimizing my portfolio and finding the best investment strategies. I spent hours on spreadsheets and research papers, trying to squeeze out every bit of return.

But, I was missing the point. I was 23 years old and had very little money to invest. The marginal gains I made from my portfolio tweaks were negligible compared to the potential gains I could have made from improving my skills, knowledge, and network. I was solving the wrong problem.

The Business Card Blunder

Another common example of solving the wrong problem is when people start businesses and focus on the wrong things. They spend a lot of money and time on designing a fancy website, printing business cards, creating a logo, etc. They think that these things will make them look professional and attract customers.

But, they are wrong. These things are not essential for starting a business. What matters more is finding a problem that people have and offering a solution that they are willing to pay for. What matters more is getting clients and delivering value. These are the hard problems that need to be solved.

The Parenting Paradox

One more example of solving the wrong problem is when parents work too hard to provide financial security for their children, but neglect to spend quality time with them. They think that money is the most important thing that a parent can give to a child. They think that money will make their children happy and successful.

But, they are wrong. Money is not the only thing that a child needs. A child also needs love, attention, guidance, and support. A child also needs to learn how to be independent, responsible, and resilient. These are the things that will make a child happy and successful.

How to Solve the Right Problem

So, how can we avoid solving the wrong problem and focus on the right one? Here are some tips:

• Take a step back and critically analyze your decisions. Ask yourself: are your current efforts aligned with your long-term goals? Is the work you are doing now the work you should be doing? Are you solving the right problem?
• Seek feedback from others. Sometimes we are too close to our own problems and we need an outside perspective. Ask someone you trust and respect for their honest opinion. Listen to their advice and be open to change.
• Simplify and prioritize. Don’t get overwhelmed by the complexity and quantity of problems you face. Identify the most important and urgent ones and focus on them. Eliminate or delegate the rest. Remember the Pareto principle: 80% of the results come from 20% of the efforts.
• Take action. Don’t procrastinate or overthink. Don’t let perfectionism or fear stop you. Just start. You will learn more from doing than from planning. You will make mistakes, but you will also make progress.

Remember, the magic you are looking for is in the work you are avoiding. The life you want is on the other side of a few hard conversations. The question is: are you willing to have them? With others? With yourself?

Do you really want to solve the right problem, or do you just think you do?