Loss Aversion and Tech Debt

Humans are loss-adverse. We place an irrationally high value on losing something over gaining an identical item. So for example, I’d be more upset about losing $10 than the happiness I’d feel by gaining $10. If I buy a meal and hate it, I’ll likely finish it anyway.

In general, people would rather gamble on a 50% chance of losing $1000 rather than giving up $500. Down $50 at the blackjack table? Odds are most people will want to try to win that back rather than take the loss. Curiously, most people would rather accept a guaranteed $500 rather than accept a 50% chance of making $1000. Irrational? Yup, but extremely predictable.

Loss Aversion is the fancy name for the phenomenon. People prefer avoiding losses to acquiring gains, which drives them to become more-risk tolerant in the face of loss. I think it can help explain how we build up and continue to live with technical debt in software development.

Tech debt is a useful metaphor describing the long term consequences inflicted upon a code base by deferring work. Similar to financial debt, we often choose to avoid doing the “right thing” now in favor of a faster path to the end result. The interest accrued by the debt adds up over time and can cause major problems.

There are lots of reasons that software engineers knowingly take on tech debt – deadlines, lack of knowledge or skills, too much work in progress – the list goes on. Sometimes it is unavoidable, sometimes not. Every project has some level of debt, though.

Paying off accumulated technical debt is where I see the ties into loss aversion. The time spent fixing a hastily implemented data access strategy, for example, is time not spent implementing a cool new feature. There is rarely any directly visible customer value delivered by paying off technical debt. In most people’s eyes, this is a loss of time, opportunity, and resources.

We are irrationally risk-tolerant in the face of this loss. Instead of spending $500 to pay off the debt, we’ll flip the coin, let the problems grow, and take the risk of losing $1000. Who knows, maybe the problems won’t surface for a long time. Maybe never. Maybe tomorrow, though.

So how do we fix this if the human mind is hardwired to avoid losses?

Shift the mindset of technical debt. Knowingly taking on technical debt is a loss, not a gain. We are losing the ability to easily respond to future requirements; we are not gaining a new feature in a shorter time frame. And existing tech debt should be seen as a sunk cost – it’s lost, and it’s better to forget the past.

If we accept the current state rather than treating tech debt as an incurred loss we will be less likely to gamble with the possibility of future losses. And hopefully our minds will start to blast warning sirens as we consider taking on new technical debt in the future.

Leave a Reply

Your email address will not be published. Required fields are marked *