We are so close
One fundamental decision in business is the make or buy decision. Should you do something yourself or hire someone to do it.
Doing it yourself is often considered to be cheaper.
Paying someone to do it is often faster but more expensive. This is mainly linked to the price of time.
Bigger companies tend to value time over money. That’s why many small companies try to do everything themselves. Unless they have loads of venture capital money. Then it’s the reverse.
Estimating the time you take to do something is difficult though. Especially for things you have never done before. How long will finding product market fit for your first product take? Difficult to say. For your 10th offering? You should have a time and process in place by now and know your numbers.
That’s where most people in business fall prey to the “near-win-fallacy”
What is a near-win?
A near win is a scenario, where you almost succeeded, but not quite.
Often this goes along random small signals of progress. Assuming you are close, you intensify your efforts.
The most prominent example of this are slot machines.You almost win big, but not quite. Assuming you are close, you continue to play for hours and make less then you spend.
It works the same in social media. You find some good content and sometimes something really enjoyable or valuable. This makes you put up with all the bad content you see.
The original value of a near win was keeping us engaged in our search for food. You see a deer, but don’t catch it. You find a fruit, but it’s not ripe yet. So you keep searching for food.
In business, we overestimate the near win as well.
Typical near wins include:
- Customers give you positive feedback (because they want to be nice)
- Users use your service for free (but wouldn’t pay for it)
- You break even (but can’t make a profit)
- Sales has lots of customers that are “about to buy” (but won’t)
- You are about to launch your product (although it will flop)
- The next milestone is about to come (but your going in the wrong direction)
Now faced with a make or buy decision, you underestimate the time to success it takes you.
That’s why especially smaller businesses too often decide for make instead of buy. A decision, they then regret 6 month later, but “now they are close, so no need to reverse”
Want to test your thought process?
Here is a make or buy decision for customer research. Read it and observe your thinking.
