Return on Investment

Calculate the risk and possible reward before taking any action.

Return on investment, often abbreviated as ROI, is a term originating from investing but applicable to all walks of life. ROI calculations help us understand the cost of taking action, the possible benefit, and ultimately answer the question: is the juice worth the squeeze?

Calculating ROI generally requires four steps:

1. Understand the cost, or investment, of the action.
2. Understand the benefit, or return, of the action.
3. Understand the likelihood of the return actually occurring.
4. Decide if the return is worth the investment.

Return on investment in real life

Return on investment is a powerful mental model for decision-making in real life. Here are some real-life examples of ROI in action.

"Should I make a financial investment?"
ROI calculations are a hallmark of actual investing. The objective of an investment is to secure a return; there's no point investing and risking your money unless there's a benefit.

"Should I accept a new job offer?"
Taking a new job is always a risky proposition. There's more at stake than just the compensation; taking a new job forces you to give up your seniority at your existing job, and can change your life in unexpected ways. You don't really know if a new job will work out until you try it.

"Should I start my own business?"
Starting a business is, for most people, a terrifying decision. If entrepreneurship interests you, do an ROI analysis to estimate how things will play out. Many times after doing an ROI analysis, you'll find entrepreneurship isn't as scary and risky as you thought.

"Should I escalate or de-escalate a physical confrontation?"
In the vast majority of physical confrontations, there is very little to gain through escalation. That said, there is a point of no return at which your focus needs to shift from de-escalation to defending yourself. Learning to make a lightning-fast ROI calculation during confrontations is critical to self-defense.

"Should I start or continue an argument?"
Verbal confrontations follow the same rules as physical ones. The vast majority of the time, you're better off keeping your mouth shut and taking some time to think. That said, there are definitely times when you need to stand up for yourself and have difficult conversations. In these cases, it's best to do an ROI analysis first to prepare for how the confrontation might play out.

Return on investment in Jiu-Jitsu 

Here are some examples of how ROI calculations could work in Jiu-Jitsu.

"From standing, should I initiate a sacrifice throw?"
Sacrifices throws are inherently risky as they require you to give up position. The cost of failure for a sacrifice throw is high. If you're going to attempt such a throw, you need to be confident that you have found or can create an opening, and you need to be confident in your technique. You also need to be confident that, if the technique fails, you can escape and recover back to a good position.

"When my opponent turtles, am I better off attempting a D'arce choke or an anaconda choke?"
Assuming all else is equal, in this situation you might want to prefer a D'arce choke over an anaconda choke. The reason why? Because if you fail an anaconda choke, there's a good chance you'll wind up on bottom in side control. But if you fail a D'arce choke, there's a good chance you'll wind up on top in side control instead. That's a much better position to be in if the choke fails. So unless you're exceptionally good at anaconda chokes, you might want to favor the D'arce.

"Should I attempt a flying technique, like a guard jump or a flying armbar?"
Any flying technique is inherently risky because you're sacrificing your alignment in exchange for momentum. Recall the principle of body tethering: if you tie yourself to your opponent while they have alignment, you can't control what happens to your body. In a situation where slams are legal, this can be devastating. But even in an environment without slams, a bad landing on your neck can result in serious injury, paralysis, or even death. In general, we do not recommend the use of flying techniques.

Context matters when calculating ROI 

ROI calculations will not be the same for every person. They're dependent on your situation, your risk tolerance, and what you bring to the table. For example, if you excel at a technique that most consider low-percentage, you may have a better ROI using this technique than others.

Another important consideration with ROI: it's not just about getting a return, it's about getting the best return. Even if you're currently getting a positive ROI, and even if it's a good ROI, it may be possible to get a better ROI if you consider other options.

Questions to ask yourself when calculating ROI

• "What is the cost required for this investment?"
• "How will paying this cost impact me?"
• "What other investment opportunities am I losing out on if I choose this one?"
• "What are the expected returns on this investment?"
• "Realistically, how likely am I to get those returns?"
• "What is the worst-case scenario if this investment goes wrong?"
• "Can I survive the worst-case scenario?"

Further study

• Return on Investment (ROI) Definition — Investopedia
• 80/20 Rule
• Economy of Motion
• Path of Least Resistance