A switching cost is exactly what it sounds like.
It's the cost involved in switching from a thing you currently have, to a new thing.
This cost could be monetary, it could also be psychological.
It can be high or it might be a negative, in other words, it might save you time, money, or reduce some psychological friction that you're currently experiencing.
I don't really want to write about switching costs from a monetary standpoint, because quite frankly, that's boring.
I'd like to explore the psychological side of switching costs.
Sometimes, switching costs are the reason that change is so hard.
Switching costs can explain why the status quo is so magnetic. You simply may not have the money (or psychological energy) to pay the switching cost.
I've been wondering if there's another factor we can consider when evaluating a switching cost, and I think I've found something worth playing with.
Compounding.
Let's explore this using a very simple example.
A new TV show
Suppose you find a new TV show that looks interesting.
It's 10 episodes long, each episode is about 50 minutes to an hour in length.
You read the description, it intrigues you, you know some of the actors, the genre seems cool, so you decide to give it a try.
Episode one is incredibly boring. What a let down.
It was just so slow.
Some of the characters seemed interesting, and the plot definitely has some potential, but it was a struggle to get through episode one.
So now, you just ask the question: Do I continue watching the other nine episodes and see where this goes or do I switch and find something new to watch?
For me, this is where the factor of compounding comes in and why I think it's an interesting factor when evaluating a switching cost.
As a basic definition, compounding is the act of something building up over time. Compound effects are everywhere, and often easy to miss.
The thing that makes compounding interesting, is that if you allow something to compound—especially if that something is a positive thing—the effects can be magical.
The other thing that makes compounding interesting, is that we have a very hard time imagining what those magical effects could look like, especially when we're very early in the compounding process.
So, back to our TV show dilemma.
A way to answer the question of whether or not you should switch, is perhaps to answer a different two-part question: Does this show have the potential to compound, i.e. build up and get better? If yes, then have I given it enough time to do so?
Compounding needs time and you're just one episode in. You're very early in the compounding process.
If you've ever had a friend say, "Just give it a few episodes, then it gets really good," they're basically saying, "Give it time to compound. Don't switch too early."
Closing Thought
The TV show example is trivial, and I used it to highlight how compound effects can often be invisible early on, which can cause us to switch too early.
The next time you're evaluating whether or not you should switch, explore your current situation and see if there's anything that has the potential to compound.
Beware, it might not be obvious when you see it.
