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earn or want to earn. This is often described as doing more
by doing less. When you diligently apply Ricardo’s Law of
Comparative Advantage in this way, you automatically raise
your level of productivity.
Application in Your Business
Ricardo’s Law of Comparative Advantage is equally relevant
in the management of your business. To the extent that you
invest any of your business’s resources—the money, time,
and energy of your employees, your physical plant and
equipment, your intellectual capital, and the like—in activities
where another company has a comparative advantage,
you incur a loss-of-opportunity cost. In some cases, the loss
can be significant.
Too often, in our efforts to ‘‘be the best,’’ we fall into
the trap of focusing on what Adam Smith called ‘‘absolute
advantage.’’ Smith advocated doing all the things you (or
your business) do better than anyone else. On the surface,
this might appear to make sense. However, Ricardo’s Law of
Comparative Advantage stresses committing your resources
to producing only those goods where you have a comparative
advantage. You should delegate or outsource everything
else.
Consider the case of one of our coaching clients, the
owner of a successful company specializing in providing secure
investments to affluent senior citizens. He has a team
of eight investment advisers and a small support staff. The
company’s marketing strategy is very specific. It conducts
regular targeted direct mail campaigns inviting people to attend
a private seminar on investing. The financial advisers