The Economics of Pyrrhic Victories

Saturday, December 6, 2014

In my book on pricing software, I included the quotation

Winning isn't everything, it's the only thing.

The implication of the quote is that one should always strive to succeed. Former managers of mine have been full of such empty aphorisms. Beyond "giving 110%" and "only accept success," an economist is duty bound to point out that a goal is only worth chasing if the return on investment is sufficiently high.

King Pyrrhus gained eternal fame for his battles with the ancient Romans. Although his forces were able to subdue the Roman attacks, the costs to his forces were so great that they proved to be his undoing. He eventually ran out of troops, due to massive casualties in each successful encounter.

Businesses often forget that even in success there are costs. A campaign to increase short-term profitability can cause significant detrimental costs in the long-term, such as increased staff attrition, loss of customer loyalty and increased customer support costs.

When performing a business transaction, it is absolutely foolhardy to only consider the benefits of an act. One most always compare the benefits to the costs (which may not always be readily apparent). Only then can one decide whether an outcome is something to be celebrated, or merely a Pyrrhic victory.

My book on how to price software, is a great reference, but if you need custom support, don't hesitate to contact me.