An Investment Strategy Applied to Consulting

"The best part of being a statistician is that you get to play in everybody else's backyard." -- John Tukey, as quoted by John D. Cook

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At SIAM News is a valuable and entertaining interview of statistican and mathematical consultant John D. Cook by Krešimir Josić. I have followed Cook's blog, originally titled The Endeavour, for years.

A short excerpt from the interview will do double duty for showing why I follow Cook and why you might consider reading the whole interview:

KJ: How do you determine which projects to accept?

JC: I'd recommend taking almost any project that pays when you first start, then gradually becoming more selective. I'd also recommend increasing your minimum project size over time. All projects take up some amount of transaction cost and mental overhead, regardless of their size; as a result, smaller projects are less profitable.

By initially casting a wide net, consultants can explore the types of available work. After a while, they may start to receive referrals in a certain area and begin to concentrate more in that particular subject. It pays to not be too set on one kind of work until you learn about existing demands in the field.

Image by Eduardo Cano Photo Co., via Unsplash, license.

Risk analyst Nassim Taleb advocates for a barbell portfolio investment strategy. One end of the barbell consists of reliable income without much downside potential, which probably also means not much upside potential. The other end can be speculative or stimulating. I try to follow this strategy by maintaining a mix of reliable projects and more interesting projects. "Interesting" often means "unpredictable," and consultants risk overloading themselves if they take on too many interesting projects at once. [link omitted, italics added]

The above quote is good advice presented in easily-digestible form, using an analogy any reasonably intelligent adult will understand. And it comes across as someone who knows what he's doing and having fun doing it.

I first came to Cook's blog because of the subject matter, but I have seen many examples of outstanding clarity in communication -- a subject of great interest to me -- over the years. And yes, Cook touches on that here and there in the interview.

There is much more to learn about consulting -- or working generally -- from the interview. "Salaried workers effectively have one client; if they lose that client, they lose 100 percent of their income all at once," Cook notes.

If you are the kind of person who enjoys learning about a wide variety of things, applying lessons from one area to others, or realizing a better mix of autonomy and income, this interview is a must-read.

-- CAV