What I Learned About Running a Startup From Econ 101 Student entrepreneur Joseph Draschil on the theory of comparative advantage and how your startup would do well to learn about it.

By Joseph Draschil

Opinions expressed by Entrepreneur contributors are their own.


I certainly wasn't expecting to find the answer to one of my earliest startup challenges in a macroeconomics class. But that's exactly what happened when my professor introduced the class to strategic-trade policy.

My partner at the time, another first-year MBA student, had been working with me on a business concept for the previous seven months. Up to that point, we had both been juggling the various tasks with no clear definition of roles. Our summer break was coming up and we were getting ready to ramp up our business. It was time to divide and conquer.

Unfortunately, when it came to dividing up the roles, I was having a hard time letting anything go. In my mind, I was better at just about everything, including pitching, sales, business development, marketing, project management, product development and design. If I am better than my co-founder or even employees at all of these things, I should do them all, right? Put the best player on the court, right?

David Ricardo, the economist who codified the theory of "comparative advantage" in his On the Principles of Political Economy and Taxation, wouldn't agree. Instead, he would say that even if a founder has an absolute advantage at two jobs -- for instance, he is better than anyone else in the company at coding and at selling -- there will always be someone with a comparative advantage over one of them.

Related: 4 Tips for Rapid Startup Growth

Without getting too deep into the math of this concept, comparative advantage says that it doesn't matter if Michael Jordan is better at every position than any other players on his team (a.k.a., absolute advantage). He is still better off focusing on playing at his very best position (a.k.a., his comparative advantage) and letting four other guys get on the court with him. Sure, Michael Jordan could theoretically play all positions better than anyone else, but he can't play them all better at the same exact time.

So what does this mean for entrepreneurs?

In the real world, resources are always constrained. And if there is any resource entrepreneurs never seem to have a surplus on, it's time. If the founder spends an hour coding, that's an hour he can't spend on sales. If he spends an hour on making sales calls, he can't spend that hour coding.

Related: 4 Tips for Turning a Dispersed Team into an Asset

For this reason, my co-founder and I split up our duties. Even though I thought I had an absolute advantage at both building the product and demand for the product through sales and marketing, it would be much more efficient for me to not try to do it alone. He would focus on sales and business development, where he had a comparative advantage. And I would focus on building the product, where I had a comparative advantage.

So, the next time you are breaking down roles among your founding team and you feel like you need to be doing all of the jobs, remember this: First off, stop kidding yourself. You're not better at everything (and neither was I). And second, even if you are better at everything, you don't have the time to do it all yourself. So, choose what you're best at and let others step in where they have abilities.

Related: How to Find Value in Other People's Problems

How did you learn this lesson at your startup? Let us know if an economics course inspired you too in the comments section below.

**Apply Now** Are you an enthusiastic college- or graduate-student entrepreneur, eager to share your on-campus experiences? Apply to be a YoungEntrepreneur.com College Treps columnist.

Wavy Line
Joseph Draschil is the co-founder of SpyGames.me, a live action, choose-your-own adventure game where you are the hero and the game takes place around you and your team as you embark across your city on a series of missions. Draschil is currently participating in Start-Up Chile and is pursuing an MBA in the top-ranked entrepreneurship program at Babson College.

Editor's Pick

She's Been Coding Since Age 7 and Presented Her Life-Saving App to Tim Cook Last Year. Now 17, She's on Track to Solve Even Bigger Problems.
I Helped Grow 4 Unicorns Over 10 Years That Generated $18 Billion in Online Revenues. Here's What I've Learned.
Want to Break Bad Habits and Supercharge Your Business? Use This Technique.
Don't Have Any Clients But Need Customer Testimonials? Follow These 3 Tricks To Boost Your Rep.
Why Are Some Wines More Expensive Than Others? A Top Winemaker Gives a Full-Bodied Explanation.

Related Topics

Business News

California Woman Arrested For $60 Million Postal Service Scam

Lijuan "Angela" Chen faces two charges that each carry a maximum sentence of five years in prison.

Business News

'I'm Not a Very Good Businessman': Kevin Costner Is Risking a Ton of His Own Money on New Project

The "Yellowstone" star discussed how he bankrolled his new epic movies — and his accountant isn't happy.

Business News

Twitter's U.S. Ad Sales Are Tanking Despite Elon Musk's Claim That Nearly All Advertisers Have Come Back — Take a Look at the Turmoil

The company's new chief executive Linda Yaccarino reportedly started her role earlier than expected.

Business News

Microsoft to Pay $20 Million Settlement for 'Illegally' Retaining Children's Information

The Federal Trade Commission says Microsoft violated the Children's Online Privacy Protection Act (COPPA) by collecting children who signed up for its Xbox system's information and failing to obtain parental consent.


Find Cheap Flights and Learn New Languages With This $160 Deal

Get Rosetta Stone, a VPN, and more in this Father's Day deal.