Sunk costs… can they sink us?

29 Sep

Sinking ShipIn his latest book on MOJO, Dr. Marshall Goldsmith ( Mojo: How to Get It, How to Keep It, How to Get It Back if You Lose It) talks about a concept called “Sunk Costs” – and how we are reluctant to let go of losing propositions in our lives.

In information technology and project management, projects are often continued because of the “sunk costs” (even when the return-on-investment is no longer positive and the project is over budget and behind schedule).  Fortunately there is a growing realization (and appreciation) that if the goals of a project won’t be reached, it is a positive step to cancel it.  Of course there will be a sense of loss (and the accompanying grief stages that go along with it) – the loss of a dream (project success), and the acceptance that the project is over.

A similar thing happens in our daily lives!  The adage “don’t throw good money after bad” is easier to say than to uphold.  I know because it’s something that I am learning to deal with.  And I’m not alone!  In face, after reading MOJO, I know that I’m among good company in the world.

Goldsmith says that it is common when we invest in a project or product or relationship (with time, energy, money, and emotion), it becomes painful to let go of the investment when things go awry. We’ve got “skin in the game” so to speak and it is painful to extricate ourselves from something we once thought would be a success!

Last year I bought a used Blackberry Storm unlocked phone from a security guard on Craig’s List for $200. and it worked for a single day (how can this happen? I must be an unlucky trusting soul.) Instead of tossing the phone in the trash, I invested a further $25 on a new battery and a new phone charger in the hopes that the phone would work as promised (yes, I did contact the seller who professed that Craig’s list is the world’s largest yard sale and you get what you get!) The phone still didn’t work and again I didn’t throw it away. I found a repair shop that promised to fix the phone by changing out the charging port and again it didn’t solve the problem.

Finally I’m at the point of throwing the phone away – but it was the sunk costs that prevented me from doing so earlier. I know that I’ll never get those heartbeats back and the loss of money, time, energy, and having a phone that works was a “LOSS”. Any loss causes a bit of grief – and admitting that we were taken or that we invested badly is a tough pill to swallow.

Slowly I’m learning that sunk costs are usually unrecoverable. I know that I avoid loss and that makes it harder to accept, grieve and move on. Perhaps it is the avoidance of grief that keeps some of us hanging on to loser projects.

How about you? Do you find it hard to let go of projects, relationships, and other investments because of the sunk costs? Can you walk away from long-term relationships that no longer bring joy? Can you let go of unprofitable projects in your life? Post a comment and share your experience!

Have a good week,

Carol

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4 Responses to “Sunk costs… can they sink us?”

  1. AndréVB Thursday, September 30, 2010 at 8:18 am #

    Hi Carol
    I´ve liked it. We really do that, even in our lives.
    In Portuguese we call this “APEGO” (foudness), I mean, the difficult to let go of (anything).
    But I believe the question is, we are educated/prepared only to win. I think that we could start learning to lose, in the sense we sometimes must lose battles for do not lose the war. May be a life strategy. And more than that, we should learn with our losts, so that we could avoid it again.
    I´ll share your text with my team.
    Best regards.
    André

  2. caiuniversity Wednesday, September 29, 2010 at 3:13 pm #

    This is a great way of explaining Sunk Costs, I’ve already pressed your post into my team’s blog (I hope you don’t mind).

    So glad to find your blog, thanks!

    -Matt

  3. JP Wednesday, September 29, 2010 at 3:01 pm #

    Remember that a good Defense project manager has a contractor in each State, so that the Congressman of the State will defend him to fund his sunk costs whatever they are…

    What I have learned from my american friends is that, when a high-RoI investment must be made, it is better to invest two time the money, so that you will reach your goals and avoid to sunk money with loose investment.

    It’s a usual French behavior: investing half the money to get half of the RoI. It sometime works, but in much cases, it does not, triple the bill in sunk costs and does not achieve anything…

    So… The only way to survive, is to learn to dive and swim…

    Yours,

    JP

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  1. Cool Post from The Dekkers Report: Sunk costs… can they sink us? « The Dekkers Report… | - Wednesday, September 29, 2010

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