No. 15 · Decisions · Economics
Switching Costs
The effort of changing keeps people where they are, even when something better exists.
In the Almanac
“Dagen H”, 1967 · “Amazon leaves Oracle”, 2019
Both stories in full, three ways to use it and where it misleads.
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Questions
What is Switching Costs?
Switching costs are everything you lose when you change suppliers, systems or habits: fees, effort, learning, data and risk. They explain why people and companies often stay with options that are no longer the best.
How do you use Switching Costs?
Before signing up for anything, check how hard it would be to leave. Notice when hassle, not happiness, is keeping you in place. And raise the cost of slipping back into bad habits to protect the good ones.
When does Switching Costs matter?
Switching Costs is one of the 35 mental models for decisions, the situations where you ask: Which way should I go? Within that, it belongs to “Valuing time and money”, alongside Discount Rate, Inflation and Net Present Value.
What is an example of Switching Costs?
Two stories show it at work: Dagen H (1967) and Amazon leaves Oracle (2019). Both are told in full in The Mental Models Daily Almanac, which has two stories for each of its 365 models.
Which mental models are related to Switching Costs?
Lock-in, Inertia and Sunk Cost Fallacy. Switching Costs itself comes from economics.