Misreading Opportunity Cost in Product Management
Key Points
- The common flaw in product‑management thinking is mistaking the true opportunity cost; it isn’t “doing nothing” or simply building the next roadmap item, but rather investing in a product direction that turns out to be wrong.
- Product releases should be viewed as “train tracks” that set a lasting direction, not isolated dots, because once a feature ships it creates momentum, support expectations, and ongoing sustain‑and‑keep‑the‑lights‑on (KLO) costs.
- Deciding whether you’re heading in the right direction is far more critical than merely scoping an MVP, yet it’s a topic most teams overlook in their planning discussions.
- With typical development teams costing around $650 k per year, CEOs worry more about wasted spend than about idle resources, leading to pressure to keep the pipeline “full” even when that over‑optimizes developer utilization.
- Over‑loading engineers and obsessing over squeezing the last 5‑10 % of capacity blinds leaders to the larger strategic cost of building in the wrong direction, which ultimately delivers far less value.
Full Transcript
# Misreading Opportunity Cost in Product Management **Source:** [https://www.youtube.com/watch?v=707O-34WWdI](https://www.youtube.com/watch?v=707O-34WWdI) **Duration:** 00:04:23 ## Summary - The common flaw in product‑management thinking is mistaking the true opportunity cost; it isn’t “doing nothing” or simply building the next roadmap item, but rather investing in a product direction that turns out to be wrong. - Product releases should be viewed as “train tracks” that set a lasting direction, not isolated dots, because once a feature ships it creates momentum, support expectations, and ongoing sustain‑and‑keep‑the‑lights‑on (KLO) costs. - Deciding whether you’re heading in the right direction is far more critical than merely scoping an MVP, yet it’s a topic most teams overlook in their planning discussions. - With typical development teams costing around $650 k per year, CEOs worry more about wasted spend than about idle resources, leading to pressure to keep the pipeline “full” even when that over‑optimizes developer utilization. - Over‑loading engineers and obsessing over squeezing the last 5‑10 % of capacity blinds leaders to the larger strategic cost of building in the wrong direction, which ultimately delivers far less value. ## Sections - [00:00:00](https://www.youtube.com/watch?v=707O-34WWdI&t=0s) **Opportunity Cost Beyond Doing Nothing** - The speaker asserts that product managers misjudge opportunity cost by viewing it as inactivity or the next roadmap item, when the true cost lies in committing resources to the wrong strategic direction, likening releases to train tracks that set a lasting path requiring ongoing support. ## Full Transcript
okay I wanted to talk a little bit today
about the biggest flaw that I see in
most product management
thinking fundamentally when we make
decisions as product managers what we're
really looking to do is we're trying to
understand is this the bet that I want
to make right now is this the right bet
for the
moment and what I want to suggest to you
is that most of the time when we are
looking at this what we're we're trying
to do is actually assess the correct
opportunity cost that we can use as a
baseline to make our
decision and the flaw we have in our
thinking is that at the end of the day
the opportunity cost is actually not
doing
nothing and it's also probably not
building the next best thing on the road
map the actual opportunity cost is
building something in the wrong
direction
and I want to kind of get into why at
the end of the day you should stop
thinking of your releases as dot points
on a graph they're not like individual
moments in time where you like Scribble
in the line and you're done right like
no your releases are more like train
tracks they're going in a particular
direction you're laying the tracks in
that direction and by the way you should
expect that your developers will have to
continue to build in that direction
because if it's at all successful
there's going to be company momentum
behind it there's going to be an
expectation of support behind it there's
going to be sustainment costs what we
call keeping the lights on or
Klo all of that is going to be built in
to the cost of your one little dot Point
launch the thing that you're proud to
send out on a Thursday don't release on
Fridays and say hey we got it
done you just have to be sure you're
going in the right direction and I think
that's something that we really miss we
talk a lot about how you Scope an MVP
launch but we talk a lot less about how
you
actually decide on whether you're going
in the right direction and just to give
you some context I actually asked chat
GPT what is the approximate average cost
of a team of software developers and a
product manager and I don't believe the
answer but the answer it gave me was
about
$650,000 a
year and when you're looking at that
kind of cost and you're a CEO what
you're worried about is that this team
is going to do nothing that this team is
sitting there and you're spending
thousands of dollars a week and you're
just not getting value and so that's why
often times you have leaders who will
tell you that what they really want to
do is make sure that the P pipeline is
packed right like that every spare
minute of your developer's time is used
for this or that or the other thing and
I will tell you if you over optimize for
that last 5 or 10% of time you're not
getting a lot out of it because one your
developers are going to be inherently
overloaded and work is inherently hard
to estimate in software engineering and
two you're missing the forest for the
trees because the biggest cost for you
is not the developers taking a minute to
breathe the biggest cost is building in
the wrong direction and your PM aiming
you the wrong way and we just don't talk
about that and I think we need to
because if you don't understand how to
look at a market look at the competitive
landscape look at your product look at
the future set look at your company
position your talent base and then say
this is the this is the correct
direction to go in and then walk back
into what is the correct piece of
software it's going to be hard right
like you're going to be sort of randomly
producing releases and hoping they add
up to something and that is what I see
in a lot of road maps is it's kind of
this like sprinkle salt and pepper on
the counter approach where you just sort
of sprinkle releases out there and that
you you hope they add up to something
but that's it's not how you cook a dish
it's also not how you do product
management it's not how you release in a
strategy that actually gets you
somewhere so remember to think about
what you're aiming for and remember to
reflect on the actual opportunity cost
of going in the wrong direction when you
make your assessments in product all
right there you go that's my tip for the
day