Doing well at a proven activity makes it rational to keep doing it, which starves the exploration needed when conditions change.
March's 1991 argument is that exploitation yields returns that are certain, proximate and positive, while exploration yields returns that are uncertain, distant and often negative. Ordinary rational learning therefore drifts toward exploitation, and the drift is self-reinforcing because competence at the current activity grows while competence at alternatives decays.
In practice
- A firm that is excellent at its declining product becomes more excellent at it each year.
- A specialist who has been rewarded for one skill for a decade is worse placed than a generalist when the skill is automated.
- Standing
- Paired with the failure trap; both are failure modes of the same exploration and exploitation balance.
- Further reading
- Wikipedia
- Subject
- Organizations & Bureaucracy
- Essay
- Why organisations learn, harden and decline