Intuition and Decision-Making

I bought my last new car about 3 years ago.  At the time I spent a few moments wondering about what I wanted.  And one thought was, I could get a hybrid, with the idea of saving money.

So a used Toyota hybrid runs, let’s say $25,000. Let’s say it gets 50 miles to the gallon.  I’ll aggressively assume I drive 20,000 miles a year and gas is three dollars a gallon. That means in one year I would spend about $1200 on gas.

A different car came up on my search, a one year old Hyundai, for $14,000. It gets 30 miles to the gallon. Again, assuming I drive about 20,000 miles a year, and assuming gas is three dollars a gallon, that means I would spend about $2000 a year on gas.

So with the hybrid, I would save $800 a year on gas.  But the cost differential of the cars was $11,000. So that means that it would take me almost 14 years to earn back the money that I would save on gas costs.

Even if my math is really wrong, and one of these estimates are wrong, let’s cut it in half. That’s still 7 years. 7 years is a long time.

Now I’m sure many of you will email me and tell me how you keep your car for way longer than 7 years, you drive your car in the ground, etc etc. Good for you. I’ve only ever kept one car longer than 10 years, it was right at about 11 or 12, over 200,000 miles. I tried really hard to keep regular maintenance on the car, and this car still started to fall apart at over 200,000.

Of course there’s other factors at play. Maintenance costs, although I suspect the maintenance cost on a Prius are much higher than a Hyundai Elantra. Peace of mind for helping the environment, which is hard to put a price tag on.

The point is, the conventional wisdom that “a hybrid saves you money”, is not necessarily true. There’s other factors at play. You have to do the analysis and think for yourself. Many times the answer for the problem you’re looking at may be counter-intuitive. The real solution for the challenge in front of you might be way outside the box and seem completely wrong at first.

Note that the above analysis didn’t take a lot of work, in fact I did it completely using Siri in about 10 minutes during my commute to work. If I was serious about it I could take a longer look at it, maybe even an entire evening with a spreadsheet. For something of this expenditure that might be worth it.

But my point is, don’t just jump to the intuitive conclusion. I know people like to rely on their intuition and emotion, but frequently (especially in tech) it can be wrong. And frequently what you hear as common sense, common wisdom, or the obvious answer that everybody knows, is in fact not the best way.

For example, hiring.  Many times the plan is to wait for someone who can “hit the ground running”.  But frequently what happens is that you end up taking 6 months longer to hire.  What was your lost revenue during that 6-month period? What will your lost revenue be during the first 3 months of the new hire, assuming ramp up time?  If you had hired someone right away, let’s say 3 months in, then let them train for 3 months, was the cost of salary/training for 3 months worth gaining 3-6 months of revenue back?

What about on-premise hosting vs co-location or cloud?  Or SaaS? Many cloud vendors will give you TCO calculators but you need to do your own.

What about bringing in a consultant?  Does the cost of a professional services engagement, plus the time it takes to define, plan, schedule, and execute, really offset the training time and costs to grow your own internal expertise?

A little bit of research, and a little bit of math, can really help play out in the long run with your decision-making. And nowadays with how easy it is to research things on the web and use spreadsheets, then it doesn’t take a lot of time or work to do some quick analysis for decision-making.

Need some help achieving your business goals using technology? Reach out to me and let’s have a 30-minute conversation.

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