MAKING BOLD DECISIONS: HOW TO LET GO OF SUNK COSTS
“We’ve already spent the money.”
This single phrase is responsible for more bad decisions than almost any other. Whether it’s millions on an IT project or $100 for concert tickets, once we part with cash, we become invested in sticking with our decision.
Several years ago, I ordered a series of concert tickets, a package of tickets for several different artists. My husband and I weren’t fans of all the artists, but any concert beats staying home in my book.
The morning of the very first concert, some friends called to invite us to an impromptu party that night. The scheduled concert performer wasn’t one of the more popular artists, so selling the tickets was not an option. But this was a party with friends we hadn’t seen in a long time. Given our flimsy social life, we hated to turn it down.
We had already paid for the tickets, so we decided the best option was to swing by the party on the way. ‘No problem,” said our friends, “Just come for as long as you can, it’s super casual.”
So, we went and just as we were starting to have fun, it was time to go. The concert was starting in 30 minutes. “We would really love to stay,” I said, “But we already have these concert tickets, so we have to go.”
Just as we were about to walk out, one of our friends said, “You know, you really don’t have to go. You’ve already spent the money, now it’s just a question of how you want to spend your time.”
He was right, we didn’t want to go to that concert; we wanted to be with our friends. We took off our coats and had one of the best evenings we’d had in a long time.
The same lesson applies to work; People often make terrible choices because they become overly-invested in sunk costs. Be it money, time, or mental horsepower, past investments can cloud our ability to think clearly about the future.
Here are some areas where sunk-costs decision making rears its ugly head:
- Career Changes: I’ve already invested 5 years. I’m halfway to making partner. Only 8 more years and then I’ll get that sweet retirement package.
(As if 8 years of your life is something you can just grit your teeth through)
- New Products: We’ve spent a full year developing this. We already did all of the testing and overhauled the supply chain to accommodate it.
(If you know it’s not going to work, do you really want to invest more?)
- Mergers & Acquisitions: The transaction is closed, we have to make it work. We already promised the shareholders.
(What will your employees and customers experience as you “make it work” and how will that impact shareholders?)
Next time you find yourself saying, “But I already…” take a pause.
You already spent the money. The time. The effort. It is not coming back.
Reflecting back to your initial goals can sustain you when things get tough. But clinging to the rose-colored glasses of a past decision, over time, will hold you back from taking necessary action.