---
id: "prereq-traditional-roi-mechanics"
type: "prereq"
source_timestamps: ["¶1", "§ Type 1: Competitive Parity"]
tags: ["finance", "metrics"]
related: ["claim-traditional-roi-fails-ai", "claim-ai-roi-timeline"]
reason: "The core thesis relies on understanding why standard ROI calculations fail to capture the nuanced value of different AI investments."
sources: ["spine"]
sourceVaultSlug: "hbr-seg-spine"
originDay: 1
articleStem: "hbr-edu-47-5-types-ai-investment"
sourceUrl: "https://hbr.org/2026/06/the-5-types-of-ai-investment-and-how-to-capture-their-value"
sourceTitle: "The 5 Types of AI Investment–and How to Capture Their Value"
---
# Traditional ROI and Payback Periods

**Prerequisite for:** the entire thesis ([[claim-traditional-roi-fails-ai]]).

**What you need to know.** How standard **Return on Investment** is calculated (Net Profit ÷ Cost of Investment) and the standard tech-investment **payback expectation of 7–12 months** ([[claim-ai-roi-timeline]]).

**Why it matters here.** The article's argument is *contrastive*: the 5 Types framework is defined against traditional ROI tools. You must grasp how ordinary ROI works — and specifically that it captures neither cost-avoidance, nor option value, nor compounding flywheel effects, nor capability premiums — to understand *why* it fails for AI. This is the intellectual baseline for the [[concept-ai-commodity-fallacy]].