Every Thursday, we have family night dinner. Â These dinners usually involve great wine, lots of laughter and interesting discussions. Â Last night we talked about sunk costs in regards to a software project.
I am fascinated about sunk costs and how our brains make decisions. Â Basically it looks like this;
I invested x so far in building this website. Â It is not working. Â I am unwilling to change the developer because of the x I invested.
Our brains become focused on the irreversible loss. Â We forget that the money is gone. Â In the process we forget that of greater concern is the potential additional costs if we stay on this path. Â How much more money will this cost???
Now this topic is not about only money. Â It might be about training time, the coach currently advising you or your relationship. Â All of it has associated costs that can involve money, intellectual energy and emotional energy.
I ask myself quite a bit about how sunk costs influence my decision making in business and training. Today I had a new lesson in sunk costs. Â When the auto market tanked, I did something I thought I would never do, and bought some shares of Ford. Â Now before I continue, I am not advocating that investors buy stocks on their own. Â I always recommend mutual funds with low costs to diversify your risk (Vanguard).
I won’t bore you with the reasons why I purchased an old school company but with a bit of luck our return was over 166% as of yesterday. Â In the last few weeks, I have been doing some research considering whether or not to sell. Â Again, I had some good reasons to sell. Â I took a family vote and the vote resulted in sell.
Did I sell? Â N0. Â I knew Ford was reporting earnings today and I decided to roll the dice. Â I rolled wrong and we will take a hit on our profits. Â There will also be hell to pay when my family finds out.
Why didn’t I pull the trigger? Â Greed. Â I saw all of my gains from the perspective of sunk costs. Â I forgot that there are no profits unless you sell. Â This tendency shows up in my investing, my business and my training. Â I tend to be conservative in all three areas of my life and reluctant to take the profits.
Why is this relevant to training? Â This week I blew up during my cycling workout. Â It was a go for broke 2×15 minutes at watts (power) in excess of my most recent 20 minute test. Â It hurt to fail and I was angry and embarrassed. Â I rarely if ever have blown a workout.
It has made me think about how much I avoid excessive risk taking. Â I hate failing. Â If you know me, or you read my blog, you can see that I have a long string of PR’s in my races. Â There are no bonks, DNF’s etc. Â I work hard but I never put it all out there. Â I think part of the reason why is that I have a lot of sunk costs running through my head which include;
- training time
- expense of race
- expense of my bike
- expense of travel
- expense of coaching
- emotional need to do well
Now these are all good reasons to do well. Â But maybe, just maybe, to get to Kona, I need to start being less cautious and risk blowing up more workouts. Â Maybe it is time to race hard and risk the DNF.
I need to take the profits of my training and stop getting sunk in more ways than one.