The Danger Of Fewer, Bigger Bets

In December 2022, Google pulled the fire alarm.

For nearly a quarter century, Google had dominated technology by making its search bar the front door to the internet. The company’s wildly profitable search business helped fund a growing suite of online apps that were free and available to everyone. Rival search engines, email platforms and productivity tools struggled to gain ground. But then, OpenAI released ChatGPT.

Overnight, people were able to ask a chatbot questions and get useful answers instead of a page of links. Inside Google, management declared a “code red.” CEO Sundar Pichai began reorganizing teams, pulling people from research, safety, and other groups to accelerate the development of Google’s AI products.

The response made complete sense. Google was facing a potentially existential threat to its core business. This was the moment to concentrate resources, move quickly and put the best people on the problem. When something becomes suddenly important, focus is a wonderful thing.

Of course, the great irony is that Google had helped create that threat in the first place. Five years earlier, a team of Google researchers had published a paper called Attention Is All You Need. They were working on a better architecture for language translation when they developed something they called a transformer. The new approach turned out to be remarkably powerful. In the years that followed, the transformer became the underlying architecture for a new generation of large language models, including ChatGPT. The real reason Google was forced to focus so ruthlessly in 2022 was that it had explored so widely in 2017.

Importantly, Google’s wide exploration gave it the capabilities that would prove critical when it was time to focus. Google was able to quickly respond with an LLM of its own because it had already invested in a wide variety of development projects. Other tech companies found themselves caught off guard.

There’s a powerful lesson here for leaders trying to get their organizations ready for the future. And there’s a cautionary tale for execs trying to make fewer, bigger bets.

Bigger Bets Are Back

Management ideas move in and out of fashion like skinny jeans on teenagers. Right now, a growing number of CEOs are talking about the need to make “fewer, bigger bets.”

Toymaker Hasbro has organized itself around a philosophy it calls “Fewer, Bigger, Better,” reducing SKUs and concentrating more investment behind its strongest brands. Hindustan Unilever CEO Priya Nair has described one of her priorities as “doubling down on fewer bigger bets to accelerate growth.” Leaders at Campari have used similar language.

These are serious companies run by smart people. And there’s solid logic behind that idea. Most large organizations have too much stuff going on. Resources can get spread so thinly across initiatives that nothing has enough support to break through. Focusing on fewer things can fix that. It gives important initiatives enough capital and talent to succeed. Leaders spend less time arbitrating among dozens of competing priorities, and the whole organization becomes easier to manage.

That logic works especially well when a company already knows where the opportunities are and what it will take to win. If a brand is growing and taking share, putting more money behind it makes sense. If a product line is structurally unprofitable, killing it can free resources for something better. The trouble starts when companies apply the same logic to a growth strategy.

The Dangers of Going Big

Imagine a leadership team choosing which five opportunities deserve serious investment. One already generates $500 million in revenue. Another serves millions of customers. A third is an extension of a brand everyone knows. Each has data, forecasts, and experienced executives who can make a convincing case.

Across the table sits a new project that might only be producing $10 million a year. Its customer base is still evolving. Its economics are fuzzy. Nobody knows exactly how big it could become. In a company that’s focused on “fewer, bigger bets,” that new project is often the first to get cut. On the face of it, that seems like a pretty logical decision. But repeat that decision across a growth portfolio and some dangerous things start to happen.

First, “fewer, bigger bets” can effectively put a company into harvest mode. The more an organization concentrates resources around its largest opportunities, the more its growth portfolio starts to resemble its current P&L. Existing businesses have numbers. Emerging businesses have possibilities. When both compete for the same few slots, today’s numbers usually win. That can be perfectly sensible for a private equity owner trying to maximize the value of an asset over a short period of time. It’s a much stranger strategy for a company whose valuation is based on long-term growth. Bigger bets inevitably pull the company to the Now and away from the Next.

Second, “fewer, bigger bets” can kill off the seedlings. Small, immature ideas can’t compete with businesses that already have scale and proof. Netflix’s early streaming business looked tiny next to its DVD operation. Streaming had fewer customers, uncertain economics and immature technology infrastructure. But that’s the nature of seedlings. If we evaluated them by how much fruit they produce today, we’d cut them all down.

The third danger may be the most subtle. “Fewer, bigger bets” can stop people from exploring new opportunities in the first place. Everyone knows the CEO wants something big, so possibilities that seem too niche, too strange or too hard to explain get dismissed before they ever make it into the room.

Human nature is a funny thing. If you ask a team to come up with a billion-dollar idea, you’ll typically get nothing back. If you ask for ten $100 million ideas, there’s a small chance that you might get something good. But if you ask people for a hundred $10 million ideas, you’ll get back a lot of interesting stuff, one or two of which might just be billion-dollar ideas. The enemy of action isn’t inaction. It’s outsized expectations.

That’s a lesson that one of the most remarkable research labs in Silicon Valley learned the hard way.

The Next Big Thing

In the fall of 1991, Microsoft cofounder Paul Allen began thinking about what might come after the personal computer. Allen believed that the technology industry had entered a slowdown. The PC revolution was still advancing, but much of the progress felt incremental. Machines were getting cheaper. Processors were getting faster. But Allen wanted to find the next great wave.

Allen approached David Liddle, a respected Silicon Valley technologist who had spent a decade at Xerox PARC, the legendary Palo Alto research center that had helped develop the graphical user interface, laser printing, Ethernet, and many of the technologies that came to define personal computing.

Together, they decided to launch Interval Research Corporation. Allen pledged to invest $10 million a year for ten years. In its first five years, Interval wasn’t expected to launch anything. But by the end of the decade, Interval would invent the next big thing in computing.

The company was shut down after eight years.

Interval didn’t fail because of a lack of funding or patience. Allen took care of that. The problem wasn’t talent. The company was able to attract many of the leading lights in computer science, engineering, design, art, and the social sciences. It wasn’t a lack of activity. At any given time, more than twenty projects could be underway.

Over and over, though, people who worked there remember one revealing thing. Whenever they came up with a new prototype or business concept, they’d be asked if the idea was going to be big enough to transform computing. If it was an idea worthy of Interval’s mandate. And too often, the answer was no.

A useful product wasn’t big enough. A promising technology wasn’t world-changing enough. Interval had been created to find the next big thing. That expectation hung over the place. Ideas that might have been allowed to grow somewhere else could feel embarrassingly small inside an organization carrying such enormous ambitions.

Interval did produce real technology. It filed patents and spun out several companies. Yet none became the transformational success that justified the mythology surrounding the lab. As the decade wore on, Allen became more impatient with the lack of commercial results. David Liddle stepped down as CEO in 1999, and Interval closed its doors in 2000, two years before the end date once printed on employee name tags.

The place had extraordinary people. It had time. It had money. It had permission to explore. What it didn’t have was permission to be small.

Building a Growth Portfolio

Most people would never manage their retirement savings the way companies are encouraged to manage growth. Imagine sitting down with a financial advisor and explaining that your goal is to retire comfortably at age 65. Your advisor listens carefully and then recommends putting all your savings into three stocks. After all, why spread the money around? Pick the three companies with the greatest potential and make fewer, bigger bets. Most of us would run for the door. We diversify our portfolios precisely because nobody knows which investments will create the best returns over time.

A company’s growth strategy deserves that same logic. A company might have two or three large opportunities where the evidence is strong enough to justify major commitments. It might have another four or five emerging businesses that have gained some traction but still need time to prove themselves. Beneath those could sit twenty small experiments exploring new customer needs, technologies, business models and markets. There’s nothing magical about those numbers. The point is to have different kinds of bets at different stages of maturity.

As evidence grows, resources can move. A small experiment that starts working gets more money, more people and a longer runway. Something else stalls and gets shut down. One of the emerging businesses reaches scale and becomes a major commitment. The portfolio keeps changing as the organization learns.

Too Big Too Soon

It’s easy to understand why “fewer, bigger bets” feels so appealing right now. AI investments are proving to be wildly expensive. Investors are getting impatient with companies that talk about long-term growth while delivering slow results in the present. CEOs are under pressure to concentrate resources behind the opportunities most likely to move the needle. All of that is real.

But uncertainty doesn’t disappear just because the pressure to perform goes up. In fact, that’s exactly when leaders are most likely to make the mistake of demanding too much certainty too early.

Future-focused leaders recognize that there are moments when concentration matters. Once an opportunity has proven itself, putting more money and talent behind it can create enormous advantage. But tomorrow’s big bets rarely begin that way. They start as small experiments, uncertain hunches, and business ideas that don’t look important enough to move the needle yet. The danger comes from deciding in advance that every important opportunity has to start out big.

After all, the strongest growth portfolios don’t start with fewer, bigger bets. They end with them.

Interestingly, not all of Interval’s investments went to waste. The company also funded research projects outside its own walls. One of the initiatives it supported was Stanford’s Integrated Digital Library Project, which explored new ways to organize and search the rapidly expanding World Wide Web. Two of the graduate students working on that project were a young Larry Page and Sergey Brin. Their work led to PageRank, the basis for Google.