Wednesday, July 14, 2010

Trade Off #3: Switching Costs vs Change Gains

Contrary to the myth of The Great Idea, we humans typically have an ample supply of promising ideas. The tricky part is in deciding which of these notions are most worth our finite resources to actually implement. Thus we come to the trade-off: do the costs of switching justify how much we would benefit from this new idea? Examples:
  • In genomics, replication errors can be useful when they lead to beneficial mutations and in fact that is how species evolve. But you have to factor in the costs of a harmful mutation as well, which is more likely, and which we can think of as the "switching cost" that keeps the rate of beneficial mutations low. (see here)
  • In psychology, keeping your identity small is useful so you minimize the costs of switching your beliefs when something else proves more true, or switching your strategies when something else proves more useful. (see here)
  • In behavior analysis, increasing the change over delay time between two reward schedules decreases the probability that pigeons will switch between them. (see here)
  • In business, upgrading to the next version of software might not be worth it, given all the work customers have to do to learn the new system. (see here)
Broadly, switching costs can come in the form of time, money, ATP, status within an in-group, psychological energy, and the possibility of messing up the transition. This balancing act is in my mind under-prioritized, and deserves its prominent place in the inventory of axiomatic trade offs.

(Above photo credit goes to SantiMB. Have any suggestions or ideas for the trade off series? Holla acha boy, amckenz at g mail)