Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Golden Hammer

What it is:

A golden hammer is a rule of thumb that people depend on too much.

How it works (Example):

For example, when it comes to marketing, we often assume that the 18-34 demographic is the "holy grail" and that we should gear products and services to people in that age group if we want to have the best sales, biggest returns, or most buzz. Although this demographic is indeed large and influential, assuming that the best marketing plan is the one that focuses on this demographic is a golden hammer -- it is not the right approach for everything, and it can even have significant drawbacks. Nonetheless, many companies continue to rely on marketing to this demographic because "that's the way it's done." 

Golden hammers take different forms, but generally they revolve around overrelying on standard practices, customary analytics, traditional approaches, or what experts say.

Why it Matters:

In carpentry, sometimes a hammer is the right tool for the job. But it isn't the only tool, and some jobs need different tools. A golden hammer is a tendency to use the same tool over and over, despite the fact that it may not be the best tool for the job. In business, companies may similarly overrely on certain analytics, marketing strategies, or rules of thumb out of habit rather than because they're the best tools for the job.