Every profitable company eventually faces a fundamental capital allocation question: What should be done with the cash generated by the business? The answer is rarely simple. A company can retain earnings and reinvest internally. It can distribute cash to shareholders through dividends. It can repurchase its own shares. It can reduce debt, make acquisitions, build cash reserves, or combine several of these options. But in the core capital allocation debate, three choices dominate: reinvestment, dividends, and buybacks. This is the allocation trilemma. The trilemma exists because each option has a different economic meaning. Internal reinvestment says, “Management believes the company can earn attractive returns by putting more capital back into the business.” Dividends say, “The company has excess capital that shareholders can allocate better elsewhere or need as income.” Buybacks say, “The company believes its own shares are undervalued relative to intrinsic value and repurchasing them is an attractive use of capital.” The best decision depends on opportunity cost. A company should retain and reinvest capital only when it can earn returns above its cost of capital and above what shareholders could reasonably earn elsewhere. It should pay dividends when it has stable cash flows but limited high-return reinvestment opportunities. It should repurchase shares only when its stock trades below conservative intrinsic value and when doing so does not weaken the company’s financial position. This chapter argues that the greatest CEOs are not those who automatically reinvest, automatically pay dividends, or automatically buy back shares. The greatest CEOs are those who understand when each tool is appropriate.