The Worst Reason For A Business Decision
A few years back pre COVID when things like this were still allowed, I went to an event in London. I was super psyched to be in the room with someone whose books I had to bow out. And his business approach really just landed for me. And I was psyched to be at an event in London because I would finally be making small business friends in my own time zone. But first I had another event. Yep. I love an event. This one was in the us. And I went to that first, had a great time flew home the next day Thailand, and by the time I got off the plane, I had a bit of a sore throat. I had one day back at home in Ireland to unpack, do laundry and pack again for London. by the time I left for London, I was feeling pretty awful. I checked into my hotel, took care of some admin and then hit the bed. I spent most of that night, fighting jet lag and coughing myself awake. When I did manage to sleep by check-in for the conference. The next morning I had lost my voice completely. When I try to whisper my name at check-in, it set off such a long rattling coughing fit that everyone in the entryway stopped talking. The conference was everything I'd hoped. It would be from a content perspective, but I barely made any of the new friends I was hoping for because AI couldn't talk B you could almost see the germs coming off me. So who wanted to socialize with me and see lunchtimes, frankly, was spent in my room, lying down, trying to nap rather than networking and as good as the content was, I spent the time not being able to ask questions because I had no voice and not really absorbing and applying the information as I alternated between trying not to have a coughing fit, try not to fall asleep. By the time I got home, three days later, I spend the next week in bed feeling awful and trying to shake this cough. I knew I was sick. I felt awful. I was jet lagged. So why did I bought a plane fly to another country and spend three full days at an event? Do you think if it was a free event in my time, I would have gone given how bad I was feeling. I went because I had spent the money on the ticket, on the flight and the hotel, and nothing was refundable though. I am fairly sure that by the end of the day one, the event team would probably have paid me to go away. We've all experienced this. Maybe you're watching a really boring movie and you stay till the end because you want to justify buying your ticket or you finish reading a really boring book because by the time you realize it was going nowhere, you were halfway through and you'd already spent all that time reading it. You might as well we'll find out what happens, right. This is what we call some cost fallacy. So a sunk cost is just a past spend of time or money, time and money that you will never get back. Right? So something you paid for or committed to in the past that you can change now. And some cost fallacy is our tendency to want to get our money's worth from that time or that effort, or that cost that we. Expended or committed to in the past. So in my case, I ignored the additional cost to myself. In fact, I actually added more time on top of the three days because I had to spend a week in bed because I made myself sick, but I still carried on because I had paid for it and I didn't want to waste it. Now as an entrepreneur, you're encountering this sunk cost bias on a daily basis, but you may be just not aware of it. So it's not registering for you. So do any of these sub Familia? I have spent so much time building this course podcast membership. I can't abandon it even though I no longer love it. I spent so much money to be in this program. I can't leave it. I've spent so much money to work with this person. I can't disagree with him and not do what they say, These things are feeding into our decision-making all the time. So let's talk about how it shows up and then what we can do instead in a couple of examples. Let's say you spent money on a coach or a program, or a course, and it's not a fit, or it's taking you down a path and you realize, actually, you know, this is not for me. I've tried it. It's not for me. What's going to happen with sunk cost bias is you think, Oh, I've spent so much money on this, so I need to finish it. I need to participate in the Facebook group. I need to go to every call. I need to follow their method. Exactly. Or it's a waste. Right. That's how it's showing up for you instead of being in that feeling of I've already spent money. So let me add more time on top of that more energy on top of that, we need to take a step back and we need to go from this point forward. What other costs. Of me continuing to do this. How much time am I going to put in this Facebook group? How much time of all the calls if I follow their method. Exactly. Even though I know it's not a fit for me, what does that feel like to me? How much of an energy drain is that? How much time am I spend resenting it? What could I be doing instead? With that time. And then look at the benefits. And then those are the two costs and benefits that you're weighing up. And this applies whether you've paid in full at the beginning or you've committed to a three pay and you're only on the first pay. The sum cost can be either the payment that you have already made, or the payments that you are committed to that all not refundable. I want to be really clear. I had that. I am not suggesting that you commit to working with someone or in someone's program and decide it's not for you. And so you just cancel your payments. That is not what I'm talking about here. I'm just saying you take those payments that you've already committed to you and you put them in the past and you say from this point forward, maybe it's not going to cost you any more money, but maybe it's going to cost you time to carry on. So it's cost and benefit analysis, but going forwards so if I gave you the money that you had spent in that course, how much more time would you be spending doing this thing? Would the extra time money effort that I'm going to have to invest to get this working outweigh the benefits and therefore I should stop or do the benefits still justify those new investments. Okay. None of us are sitting there consciously choosing to fall for this sunk cost bias or some cost fallacy it's emotional and not rational. So the first thing we need to do is just be aware of it. And then using as much data as possible because nothing counts as emotion like data. What does the future look like? What are the future costs and the future benefits, and then make a decision from, I also want you at that point to really give yourself a break. If you decide to change course, if you decide to walk away from the time, money, energy investment. Take a moment to look at the lessons learned. And once you've done that, move on because beating yourself up about quote unquote, wasting that time money, energy effort is just adding even more waste.
The one thing we all do when making a decision that’s costing you time, money and energy.
The more data-driven you can make your decision, the better it will be for your future investments of time, money, and energy
In This Episode
- How I made this mistake
- What to look out for when making a decision
- What to do instead
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The information contained above is provided for information purposes only. The contents of this podcast episode and article are not intended to amount to advice and you should not rely on any of the contents of this article or episode. Professional advice should be obtained before taking or refraining from taking any action as a result of the contents of this article. Diane Mayor disclaims all liability and responsibility arising from any reliance placed on any of the contents of this article.