Important lesson for product development

In this Freakonomics podcast, Are Personal Finance Gurus Giving You Bad Advice?, host Steven Dubner compares ideas about personal finance that comes from academic/economics theory and from practical, real world experience.

It provides a good example of what I see in product development in companies, where mangers approach product development with an academic view, ignoring practical experience, and then are surprised when the product flops.

In one case, Dubner compared the sound academic advice of paying off the most expensive debt you have first vs. Dave Ramsey’s Debt Snowball, which encourages you to to pay off smaller debts first.

On paper, the academic approach makes sense. You will spend less money paying down the most expensive debt first and have more money in your pocket when you are done.

But, in the real world, Ramsey’s insight was that removing a smaller debt from your balance sheet sooner gives you a win that makes you feel like you accomplished something and keeps you motivated to continue paying down debt.

This practical insight recognizes something the academic approach misses, sticking with the habit of paying off debt is far more important to success than paying off the debt in an economically efficient manner. Said another way, too often paying off the highest priced debt first results in you not sticking with the program.

Or, as one of the guests said, “What diet works? The diet you stick with.” Sticking with a diet is ~10x more important than picking the optimal diet (that you may not stick with). It’s funny, isn’t it? We overlook the factor that is 10 times more important to success than the factor we think is important.

I believe there is an old saying for this: Penny-wise and pound foolish.

An important step of product development is to simply ask are there factors that we are missing? Like in this case, are we putting too much importance on economic efficiency and not enough on consistency of sticking with the habit?

I’m amazed at how often this important step is not only skipped, but avoided at all costs. It’s almost like the elephant in the room. Folks sort of know it exists, but because groupthink has taken over or this is the leader’s pet project, it doesn’t get addressed. Well, until it flops.



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