Golden Hammer

AAA

DEFINITION of 'Golden Hammer'

An excessive dependence upon a specific tool to perform all sorts of functions. The golden hammer principle states that given a specific tool to use, all of the world looks like an appropriate place to use that tool. For example, a small child that is given a hammer may regard everything around him or her as a nail.

INVESTOPEDIA EXPLAINS 'Golden Hammer'

The golden hammer is also known as Maslow's Hammer or the Law of the Instrument. It was first voiced by Abraham Kaplan in 1964 and then widely disseminated in Abraham Maslow's book "The Psychology of Science" in 1966. The idea has also been attributed to Mark Twain, despite the lack of evidence to that effect. In business, it refers to an overdependence on a tried and true strategy or instrument, when another approach may be more suitable.

RELATED TERMS
  1. Behavioral Finance

    A field of finance that proposes psychology-based theories to ...
  2. Behavioral Economics

    The study of psychology as it relates to the economic decision ...
  3. Market Psychology

    The overall sentiment or feeling that the market is experiencing ...
  4. Loss Psychology

    The emotional aspects associated with investing and the negative ...
  5. Inflationary Psychology

    A state of mind that leads consumers to spend more quickly in ...
  6. Head-Fake Trade

    A trade where a stock or market appears to be making a move in ...
RELATED FAQS
  1. How does days to cover a short position relate to a short squeeze?

    Days to cover a short position reveals the intensity and duration of a potential short squeeze. A short squeeze occurs when ... Read Full Answer >>
  2. Is it better practice to use a stop order or a limit order?

    Both stop orders and limit orders have their advantages and disadvantages; traders need to decide between the two based on ... Read Full Answer >>
  3. What is the difference between a buy limit and a sell stop order?

    A buy limit order is a specific type of buy order used to enter a market, while a sell-stop order is a sell order that can ... Read Full Answer >>
  4. What is the difference between a short squeeze and a long squeeze?

    A short squeeze and a long squeeze are situations that can force traders and investors out of their positions. A short squeeze ... Read Full Answer >>
  5. Why does the efficient market hypothesis state that technical analysis is bunk?

    The efficient market hypothesis (EMH) suggests that markets are informationally efficient. This means that historical prices ... Read Full Answer >>
  6. What does it mean to be absolutely risk averse?

    Some people are absolutely risk-averse, which means that they cannot tolerate sustaining any sort of loss, even a temporary ... Read Full Answer >>
Related Articles
  1. Retirement

    Financial Planners: Specialize In Seniors

    Find out how this demographic has all the needs to keep your firm busy year-round.
  2. Professionals

    Start Your Own Financial Planning Firm

    Read on to find business tips to make your dream a reality.
  3. Bonds & Fixed Income

    Protect Assets, Create Income, Retire Happy

    Find out what you can do to ensure a comfortable transition to your post-work years.
  4. Professionals

    Be A One-Stop Shop For Your Clients

    Offering comprehensive financial services can bring in business, but coordination is the key to success.
  5. Professionals

    Boost Earnings Through Financial Planning

    Meeting more of your clients' needs will help you achieve your financial goals.
  6. Economics

    What are Deliverables?

    Deliverables is a project management term describing an object or function that must be provided or completed by a certain due date.
  7. Trading Strategies

    Why Volatility Is Your Friend

    Instead of looking at falling share prices as something negative, investors should view it as an opportunity to acquire ownership in fundamentally strong companies at low prices.
  8. Professionals

    Characteristics Of Successful Traders

    Successful traders share psychological characteristics that augment their personal and financial power.
  9. Active Trading

    Twitter and Stock Trading: A Real Strategy?

    Is it really a profitable strategy to look at the number of tweets about a stock as an indicator to help you decide to buy/sell a stock?
  10. Investing Basics

    Gain The Needed Insights To Spot Stock Pick Scams

    Uneducated traders are often ensnared by "hot stock pick" scams, but educated traders use key insights to make well-timed trade entries and exits.

You May Also Like

Hot Definitions
  1. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  2. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  3. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  4. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
  5. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating ...
  6. Risk-Return Tradeoff

    The principle that potential return rises with an increase in risk. Low levels of uncertainty (low-risk) are associated with ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!