How long have you held on to a financial investment too long? What about a pet project or business model or idea? What about a product line, or declining market? How about an employee that you hired?
By Randy Chittum, Ph.D.
Most of us are familiar with the concept of sunk-cost bias. It tells us that we are more likely to continue on a path if we feel like we have invested time, money, or energy. We are similarly familiar with the idea of opportunity cost. We know that our commitment to doing one thing means that we are essentially choosing that thing over many others. We mostly do both of these unconsciously. Considered independently, there are significant consequences, but what are the implications of considering the impact of sunk-cost and opportunity cost in tandem?
It almost certainly suggests that we should be quitting more things.
The quitting falsehood
“Winners never quit and quitters never win.” So many successful leaders are hardwired with this falsehood. There is actually evidence that people are more successful and psychologically healthy when they thoughtfully quit. Far from an indication of being weak, it is a sign of strength and balance. The idea that quitters are weak is predicated on the idea that we quit because it is hard. That is not what we are talking about here. In this scenario we quit because the continuing investment is no longer wise when put in the context of all the possibilities.
There is a difference between quitting and giving up. Giving up may be more closely associated with waning will power or commitment. It is more about the person than the situation. Quitting on the other hand is more value neutral. It is a thoughtful choice that considers how we got where we are and what we sacrifice to stay here. It is balanced and measured.
How long have you held on to a financial investment too long? What about a pet project or business model or idea? What about a product line, or declining market? How about an employee that you hired?
One commonality among most business life-cycle models is a steadily increasing commitment to how things have been. We become organized around self-protection. Those who are new to the playing field are often organized around risk, because they often have very little to protect. Entrepreneurs tend to be very good, especially early, at experimenting with new ideas. What this means in practice is that they know how and what to quit.
We have been talking about complexity in this column this year. One of the key strategies for leading through complex times is to create what are called “safe to fail” experiments. In other words, to move beyond the platitude that is to be “entrepreneur-minded” and instead to actually replicate the most valuable characteristic of entrepreneurs. Safe to fail experiments require a bit of a quitter’s mindset.
I imagine the learning challenge is obvious. Find something to quit. There is a very good chance you already know exactly what it is. If you quit something, let us know how it goes at randychittum@still-leading.com!
Dr. Randy Chittum is an executive coach who works with executives and managers worldwide in a variety of organizational settings. He recently served as Vice President, Leadership Development at a publically traded company, where he reported to the CEO and coached executives, created and managed succession planning programs, taught leaders, and worked with intact teams to enhance performance. Randy currently serves on the faculty of the Georgetown University Leadership Coaching program in the Institute of Transformational Leadership. For more information, visit www.still-leading.com