Path Dependency
Categories: Company Management
We’ve all been there, asking in our own heads: why are they still using that? There are waaayyy better, waaayyy newer, alternatives. A company that doesn’t know what the “cloud” is. Or your mom who is still using hotmail, with ads galore attacking her in her inbox. Or maybe a growing office is having trouble scaling, only having one login for a tool dozens of people are using. Or your dad paying 3x as much money for ad-riddled TV than some alternatives with the same programs.
What you’re looking at is path dependency: when people keep using what they’re using, and doing what they’re doing, even if it seems irrational based on newer, better, more efficient alternatives.
Sure, sometimes it’s not worth it to switch. If you’re in the Apple universe and are considering switching to Android and PC, you know how much work that would potentially take. Apple has cultivated that path dependency to keep you right where they want you: paying them instead of others.
While we see path dependency everyday on a small scale, it also happens on a bigger scale. Institutions are slow to change and update themselves...plus there’s that sea of red tape to wade through.
Unfortunately, because of the transition costs, we’ve got path dependency. This can be not-great, since it results in situations where firms, institutions, and consumers all end up with one technology, even though another technology might be much better.
