Amey-Thakur Capital allocation
Allocation is the highest-leverage repeated decision in a business, and it is usually made by inertia: last year's budget adjusted. Doing it deliberately means comparing opportunities on the same basis and being willing to stop things.
Method
- Compare on the same basis. Expected return, time to return, and risk, so a marketing spend and an engineering hire can be weighed against each other rather than debated separately.
- Treat sunk costs as irrelevant. What has been spent should not influence what to spend next, though it reliably does (see decision-journals).
- Reserve for optionality. Committing every pound to current plans leaves nothing for the opportunity that appears, and opportunities do appear.
- Fund in stages against milestones. Tranches released on evidence limit the downside of a wrong allocation and force honest checkpoints.
- Name what you are not funding and why. An allocation decision that never says no has not allocated anything (see prioritization-frameworks).
- Distinguish maintenance from growth. Keeping the business running is not optional and should not compete with growth bets on the same list.
- Review allocations against outcomes. Whether last year's bets returned is the only way the process improves (see agent-strategy-review).
Boundaries
Allocation frameworks structure judgement rather than replacing it, and expected returns are estimates that flatter whoever produced them. Financing, tax, and investor obligations constrain the choices and need qualified advice. Attention is often scarcer than money and rarely budgeted.