Abraham Maslow developed the concept of the “golden hammer” in 1966.
Generally speaking, a golden hammer is a singular tool or strategy used by an entity to perform many functions, to the point of excessive dependence. The concept of a golden hammer is related to psychologist Abraham Maslow’s law of the instrument. Maslow observed that as we become more familiar with a particular tool or technology, we tend to see solutions to problems in terms of that tool or technology. This reasoning led to the popular phrase “If all you have is a hammer, everything looks like a nail.”
Though often applied to research in the social sciences, the concept of a golden hammer has taken on specific meanings in the business world. In investing, it takes on the form of a trader being overly dependent on a particular analytical tool to make all decisions. It can also refer to a company that similarly only uses a particular demographic or analytical model in all its decision-making processes. In either case, excessive dependence on familiar tools can lead to inflexibility in the event of a market disruption. “Golden hammer’ can also be used in a more nuanced sense to refer to a blunt solution that is in need of refinement. Golden hammers in the above sense should not be confused with hammer patterns used in analytics, which sometimes correspond with “golden” ratios.
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