2018 is just around the corner – New Year’s fireworks, parties, and the never-ending resolutions.
If your social media feed is anything like mine, it’s currently clogged with “I will…” and “My Resolutions…” posts.
Some resolutions have to do with personal development, like health and generosity.
Others are more professionally-focused, such as finishing a degree program or expanding a department.
This time of year, the New Year, is all about one thing – the future.
Sitting down amidst the post-Christmas glow with the intent of drafting my own list of New Year’s Resolutions, I realized that my ambitions regarding the future weren’t what was holding me back. I’m always pushing my career forward, I’m on track with my education, I volunteer a lot, I sit on multiple nonprofit boards, and I run every other day.
So what’s holding me back? My hesitation to let go.
Failed work projects, course retakes, severed network ties, and even consulting services that consistently yielded low returns were my let’s-make-this-year-awesome hang-ups. No matter how many times I analyzed the situation, and (again) assessed it to be no longer a profitable or productive venture, I just could not let go, even when holding onto to these time sucks kept me from moving forward with my goals.
Sounds like a chant from Overachievers Anonymous?
Well, there’s actually a name for my (and maybe your) anal retentive inability to let go of past pursuits in lieu of better ones. It’s called sunk cost fallacy, and it’s a key principle in the study of Behavioral Economics.
Screw Sunk Costs
Sunk cost fallacy occurs when someone sticks with something unproductive, like a project, a class, a business, due to previous resource investment.
The classic sunk cost example is going to the movie theater and sitting through a rotten film because “you already paid for it”. This type of unproductive (but extremely common) line of thinking reasons that the smart decision would be to sit through the awful film to get your money’s worth (whatever that is).
Still confused? Let the Father of Behavioral Economics, Richard Thaler, explain:
The entrepreneur’s example of sunk cost fallacy would be investing $10,000 in a marketing campaign to reach a target market that turned out not to be one’s target market but refusing to rethink the agenda based on the $10,000 initial investment (gotta get your money’s worth out of it…or do you?).
For me, sunk cost fallacy tends to rear it’s ugly head when I find myself bending over backwards to keep a client I rarely turn a profit off of, sticking with an academic program that won’t yield the financial return, holding onto to stock shares that I paid four times their value months before, and trying to hold onto a business model that worked three years ago but is now obsolete (thank-you, Mother Technology).
As a professional, I cannot move forward with my career when my time and energy is consumed with keeping old and unproductive stuff going.Screw sunk costs before they screw you. Click To Tweet
Cattle, Costs, and an Ever-Growing Cull List
In case Behavioral Economics isn’t really your thing, I’ve got an earthier sunk cost scenario for you:
I raise cattle.
I make money only when my cows get pregnant and bear a healthy calf.
Sometimes, some cows aren’t able to conceive; maybe it’s bad genetics, maybe it’s poor nutrition, maybe it’s a 2-degree weather change (cows can be quite finicky).
Bottom line is cows that don’t produce drain my farm’s resources, and if I held onto all the infertile cows, feeding them and caring for them while they lived out their happy little lives and very expensive lawn mowers, I would be out of a farm in just a few calving seasons.
So because I love farming and I have to pay my land notes (and student loans, and vehicle payment, and farm debt, and…well, you get the picture), I cull unproductive cows from the herd. It doesn’t matter how sweet they are, what I’ve named them, or how many Instagram likes their #MooondaySelfie generated, cows that can’t produce babies have to go.
New Year’s Resolutions and Sunk Costs
Sitting down with my was-going-to-be-my-New-Year’s-Resolutions in hand, I shifted gears and thought about all the ways sunk cost fallacy was holding me back.
For my business to grow and my family to expand, I had to stop letting past investments skew (or stifle) my future ones.
So, just like I do every year after breeding season (cows, that is), I started a new list: My Professional Cull List. All unproductive clients, poor financial investments, and flopped work projects were carefully inventoried and designated for the chopping block.
For me to move into the New Year with the gusto and gumption required of a trailblazing professional, I had to get real about what was working and what was not. I couldn’t keep holding on to the things that were holding my business and career back.
So if you’re stumped on New Year’s Resolutions, I encourage you to consider creating a New Year’s Cull List. Don’t let what should have worked (but didn’t or isn’t) keep your career in a perpetual (and unprofitable) holding pattern.
Cut that stuff lose and get busy focusing on investments that have the potential to yield a bright and shining future!