Is "Sunk Cost Leadership" Unwittingly Sinking Your Team?
How many heads of state at COP27 regret signing up for failed energy policies?
How many investors regret buying into the FTX hype?
How many voters regret casting their ballot 6 weeks before Election Day?
How many of those people have the intellectual honesty to ADMIT their mistakes instead of rationalizing and doubling down on regretful decisions?
Regardless of the answers to those questions, YOUR poor response to buyer's remorse—in business, politics, and life—can drain you of time, money, and energy.
So please take a few minutes to ask yourself:
"In what ways is a 'sunk cost leadership mindset' unwittingly sinking my team's prospects for long-term success?"
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Transcript
(AI training in progress; please excuse any errors)
Well, it's been one full week since the US midterm elections. And even though we don't yet have an official announcement as to who will be controlling the US House of Representatives, one thing we do have plenty of is post election analysis. And of course, in the case of the Republican performance, you might say it's more of a post mortem than post election analysis. But setting that aside and keeping the energy detox apolitical, as ever, the reason that we're going to focus on some of that post election analysis is because one big theme from all of that is the impact of early voting and in particular mail in voting. And what generated the idea for today's conversation was a recent article in the Pittsburgh Tribune review that highlighted a couple of Republicans here in southwest PA, two of which were adamant that Republicans need to embrace early voting, they need to embrace mail in voting. And those two individuals are one Jeremy Shafer who lost a bid for the US House of Representatives. And Sam DeMarco, a Republican county Councilman here in Allegheny County. And both of those individuals said, hey, when the Democrats are getting all of these early votes in, it's giving them a head start, basically, and you know, it's up to Republicans to make up that ground and make up almost all of that ground on election day itself. So why not embrace early voting instead of trying to, to push it out? And you know, I found that interesting. I thought the recommendation was interesting. And I shared that in conversation casually with somebody on Sunday afternoon. And what was sort of extra interesting about that person's response was, hey, he said, I wonder how often you have a bit of voters remorse or buyer's remorse of people that voted six weeks before the election and in you know, over time decided that, hey, you know what, maybe I should have cast my ballot for the other person. And obviously, that was highlighted, very much. So here in Pennsylvania, when about 600,000 people voted before the infamous John Fetterman, Dr. Oz debate. And again, setting aside the politics and how many people may have wanted to switch their votes afterwards? This person's question was, how many people wind up doubling down on their original vote, even though they would have rather changed it? How many people in casual conversation with friends or family would have said hey, for example? Oh, yeah, I voted for John Fetterman. And you know, did you see that about Dr. Oz? Did you see that latest thing that that happened? Or whatever, even though in their minds, they're saying, Yeah, honestly, I might have gone the other direction. But again, there's this rationalization, rationalization if you will, right. There's this again, doubling down that some people gravitate towards. And the reason I'm bringing that up today is because the same exact thing happens far too often with leaders. How many leaders make a decision that they know in hindsight, yeah, they should have gone another direction. But they decided to double down instead of going back and saying, hey, you know what, hindsight should have done this. Here's how we're going to adapt going forward. Here's the new plan going forward. And probably the same analogy there, you could say is almost a sunk cost approach, right? In business, a lot of leaders, a lot of individuals rely too heavily on sunk costs, hey, we made this investment we should, you know, try to try to salvage it as much as possible, instead of saying, hey, no, it's this is day zero, right now, what is the most economic decision going forward? And again, we can talk about instances of sunk cost, thinking that's harmful in the energy industry. And you think about a well that has some issues or drilling, you get stuck, you have some some major issue, you can spend billions of dollars trying to salvage that well, where you can cut your losses and start fresh move on. And that's not to say that sometimes it doesn't make sense to salvage things, of course, but when your default is to gravitate towards this sunk cost mentality, where you're allowing those sunk costs to, to over influence your thinking and your planning, instead of being forward looking, well, that's the antithesis of what you want to be as a leader seem to in your personal life, right? You go to a restaurant and you order something that you know, again, you maybe regret a lot of people, whether it's out of politeness or fear or whatever, are disinclined to admit that oh, yeah, what I ordered is not good. So they'll just say, Oh, yes, yeah, this is pretty good. I'm enjoying this same with a movie or a TV show the bias towards people saying they like something, for whatever reason, is huge, right. And a lot of that comes back to this buyer's remorse and how certain people respond to buyer's remorse. And obviously, I get a whole litany of things from personal life and from business about buyer's remorse and sunk costs. But I'm going to sort of end this intro here with one other key example. And that is around the responses to climate change. And in particular, what's going on at COP 27, where in many cases, you have many leaders who are simply doubling down on failed approaches, they're doubling down on failed approaches to climate and to energy for who knows what reason, again, is it fear is it because it would be more difficult to maybe change The narrative or to do an about face or at least turned, you know, 10 or 15 degrees? How much of that is going on? How many people will continue investing billions upon billions of dollars and things just because we've already invested hundreds of billions of dollars before? Again, it's an open question. It's a rhetorical question are not taking sides one way or the other. But this thinking is catastrophic, it's catastrophic for you, as an individual leader, it can be catastrophic for companies can be catastrophic for countries, of course, who continue to double down and stand instead of saying, hey, objectively, you know what, I cast my vote figuratively for this. But you know what, I think in hindsight, I'd like to change my mind. Sometimes you can't change your mind, as is the case, at least in voting here in Pennsylvania, in some cases, you can at least change how you go forward and how you respond to people. And this is a big theme that I see, of course, in coaching. And it's consistent with sort of the goals of the GPS method that we've talked about a lot here on the energy detox, where you as a leader, you want to be in control, you want to make sure you're surrounding yourself with resources that allow you to get from point A to point B, much like a GPS helps you get from point A to point B. But if you recall, the three elements of that GPs are grow, protect, and sustain. And being a sunk cost leader, if you will, and allowing your response to buyer's remorse to be a horrible response is the antithesis of GPS, because it stifles growth, it doesn't allow you to go forward. In fact, in many cases, it makes you go backwards and revisit these, these decisions and find yourself stuck. And from a protection standpoint, you're not protecting what actually matters, which is the future and again, the development of your team, know you're protecting some decision that you made out of fear, or whatever the case is. And finally, the sustainability again, this is the opposite of sustainability. When you have the sunk cost approach, and drains a lot of energy, a lot of time, a lot of emotion. And again, you find yourself as in the hypothetical case of the person I was speaking with, you find yourself almost trapped in a lie and trying to rationalize the decisions that you've made in the past. So take the time today to ask yourself, are you acting in this sort of sunk costs and buyer's remorse kind of way? Or are you taking the more honest approach? Or you're looking at your actions and your decisions? And as you communicate with your stakeholders, are you saying, hey, look, this is what could have been done differently. And more importantly, this is how we're going to do things going forward, that's a positive way to do things. What you don't want to do is rationalize, you don't want to get in the habit of of defending and getting overly defensive about your decision, if you arrive at the conclusion that perhaps that decision was not the best one for you and your stakeholders. The other big theme that this engenders is this idea that the results don't always speak for themselves. Because again, we don't know how the election results will play out in terms of the country and how it's going to move forward, necessarily. But when you have short decisions, like again, maybe a business decision on whether to plug a well or to move forward or to make some sort of investment that goes south or to move all of your retirement savings into bitcoin trading through FTX, or whatever the case is, those decisions in many cases have clear short term results good or bad. But as we've said many times, it's less about the outcome and more about the decision making process. So don't allow yourself as a leader, and more importantly, don't allow those who you are leading to conflate the decision with the results, you can make very well informed decisions, including on voting and be totally wrong, you can be totally wrong about the candidate you voted for. And that's okay. As long as you acknowledge that, Hey, maybe I shouldn't have ingested this information. Maybe I should have read this. You know, maybe I missed this. These are the questions I'm going to ask next time. Whatever that case is. That's a positive response to this. Not that negative response to buyer's remorse were two sunk costs. So with that, again, I can go on and on with different anecdotes. I think the point is clear. If you're if you're still hanging around, if you've decided to invest your precious time listening this far into the energy detox today, I thank you. But regardless, as you go forward, make sure that you are inclined to move on, if you will, in fact, I'd be inclined to to go so far as to say sometimes you just need to give up, you need to cut your losses, you need to move forward, you need to ask, So what So what if you made a mistake, whether it's a mistake on who you voted for or house you bought, or what you ordered at a restaurant or moving all of your retirement into crypto, whatever that is, it's okay to say, well, so why you made a mistake in the past. Let's move forward. So with that, I encourage you to give up when it makes sense to cut your losses to admit defeat when it makes sense. And to, you know, embrace buyer's remorse and say, well, that's a mistake that I'm not going to make again, and here's how I'm going to avoid it. So with that, I thank you, as always, for tuning in to the energy detox, and hope you have a great rest of the week.