Every Thursday, we have family night dinner.  These dinners usually involve great wine, lots of laughter and interesting discussions.  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.  Basically it looks like this;

I invested x so far in building this website.  It is not working.  I am unwilling to change the developer because of the x I invested.

Our brains become focused on the irreversible loss.  We forget that the money is gone.  In the process we forget that of greater concern is the potential additional costs if we stay on this path.  How much more money will this cost???

Now this topic is not about only money.  It might be about training time, the coach currently advising you or your relationship.  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.  When the auto market tanked, I did something I thought I would never do, and bought some shares of Ford.  Now before I continue, I am not advocating that investors buy stocks on their own.  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.  In the last few weeks, I have been doing some research considering whether or not to sell.  Again, I had some good reasons to sell.  I took a family vote and the vote resulted in sell.

Did I sell?  N0.  I knew Ford was reporting earnings today and I decided to roll the dice.  I rolled wrong and we will take a hit on our profits.  There will also be hell to pay when my family finds out.

Why didn’t I pull the trigger?  Greed.  I saw all of my gains from the perspective of sunk costs.   I forgot that there are no profits unless you sell.  This tendency shows up in my investing, my business and my training.  I tend to be conservative in all three areas of my life and reluctant to take the profits.

Why is this relevant to training?  This week I blew up during my cycling workout.  It was a go for broke 2×15 minutes at watts (power) in excess of my most recent 20 minute test.  It hurt to fail and I was angry and embarrassed.  I rarely if ever have blown a workout.

It has made me think about how much I avoid excessive risk taking.  I hate failing.  If you know me, or you read my blog, you can see that I have a long string of PR’s in my races.  There are no bonks, DNF’s etc.  I work hard but I never put it all out there.  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.  But maybe, just maybe, to get to Kona, I need to start being less cautious and risk blowing up more workouts.  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.

2 Replies to "Sunk"

  • comment-avatar
    "the uncoachable"
    January 28, 2011 (7:00 pm)

    word. starting to speak my language, sue. made me smile to read your blog today.

    • comment-avatar
      January 30, 2011 (6:19 pm)

      Now you made my day…thank you!