The Sunk Cost Fallacy is Costing You A Fortune

So I’ve talked about it a couple of times on the pod recently, is that I have a very big keynote or very big speech that I’m giving at the end of February, where I’ll be on stage with Tom Bileu, and he is, in my eyes, one of the best orators, best speakers of this generation. I think he’s fantastic. And so I feel a lot of pressure to go and deliver a great experience for the audience and deliver a ton of value, especially by juxtaposition of being next to Tom. And so I’ve been taking it very, very seriously since November, practicing this speech, which is about 40 minutes long every single day. So far, I’ve done probably 80 reps. I’ve gone through this 40 minutes speech 80 times, and I still have about three weeks now until the big day. So we’ll probably get over 100 reps on this one speech. And I’ve shared that on past episodes as a benchmark, an understanding of, like, this is the amount of work that goes in to achieve a baseline level of quality.

Because I think often you can look at the finished product of a YouTube video, or of a keynote speech, or of a blog article, and you think that the person who created it just kind of spawned it into existence in the span of an hour. And in my experience, the people who are fantastic at what they do, they spend an inordinate amount of time honing their craft. It takes far, far more reps than we often give credit to to achieve greatness. And so I’ve been taking that mindset into this particular skill of public speaking, wanting to continue to improve and get really serious about it. But a couple of days ago, I had this revelation, or this realization that the speech wasn’t everything that it could be. It wasn’t delivering the maximum amount of value. And so I had to do some hard reflecting and ask myself, well, what would it take to make this better? Like, if I really wanted to make this as great as it could be, what would that require of me? And the conclusion that I came to? Well, let me tell you this other story, as I was wrestling with this, is there’s a story of Daniel Kahneman, who wrote the book thinking fast and slow. He’s a famed economist.

It’s one of the best books on psychological biases. He talks a lot about the cognitive biases that all humans innately have. And one of the fallacies in there, or one of the cognitive biases, is something called the sunk cost fallacy. It’s this idea of, like, throwing good money after bad when you’ve put in so much time and energy into a thing and now you have so much inertia that you just continue staying the course rather than changing because you don’t want all that time and energy and resources to have gone to waste. So you just keep doing the thing, even though you know that thing isn’t going to move you actually towards your goal. It’s not going to get you to where you want to go. Fundamentally, you realize you put the ladder against the wrong wall, but you’re already three, four of the way up and you’re like, I might as well just keep going regardless of the fact that when I get to the top of this wall, it’s not actually where I want to be, right? This is how we go through life in a lot of cases. And that there’s a corollary here with going to school and getting a job, working at w two, and then you’re getting 10, 15, 20 years into using your education and building a career within this thing, that then you realize, I don’t love this.

This isn’t what I want to be doing. But you’ve come so far, so you just keep going. This is the idea of the sun cost fallacy. Now, Kahneman, what I found so interesting was this quote that I found from his co writer, co author on that book, Jason Zweig. Jason shared this anecdote about how Daniel would throw out entire chapters and just start over completely anew. And this blew Jason’s mind. And he approached Daniel and asked him, he’s like, how can you do this? How is it possible for you just to throw away an entire chapter and then start from scratch as though that chapter had never existed? And Daniel Kahneman looks at him and he goes, it’s because I have no sunk costs. And I thought, that’s a badass quote.

I have no sunk costs. It’s this idea that there is no amount of work or energy or expenditure of resources that he views as being sufficient to in and of itself justify continuing forward. And he’s not afraid to cut the cord and say, no, that was a waste time to pivot and do something different. There’s a lot of power in that. It’s very hard for humans to embody this, but this is often what it takes to achieve greatness, because often quantity leads to quality. And the reason it leads to quality is because as you produce more and more things, let’s say in the case of the speech that we’re working on, you gain more perspective about what’s good and what isn’t? Your taste starts to evolve, and your capacity to understand the complex spectrum of equality expands as well. And there comes a point then, and this is the point that I reached with this speech after about 80 hours of work on it is, okay, this isn’t everything it could be. And now I know how to fix it.

I didn’t know how to do it before because I didn’t have the skill. I didn’t have the expertise. Now I do. And now I have a question to answer for myself, which is, will I take this new knowledge and expertise and apply it, or will I stay the course? Now, applying it seems like on paper, you go, oh, yeah, that seems easy to just do that. But the reality is, to apply this would require starting over effectively and rebuilding this thing from scratch. And the speech that will come out of this will look fundamentally different than the first speech. And so the question is, will I throw away the 80 hours of work and go and build the new thing? I know the answer for myself is yes, because I’ve done this a number of times. Not with speeches.

Not just with speeches, but with YouTube videos that I’ve spent 20 hours on and then decided to scrap and rebuild it. Or from a book that I got four drafts in and realized it’s not good enough, and I rewrote the entire book from the beginning. So I’ve done this enough times that I know this is the path and I know it’s the path that I want to pursue. But it’s not always so easy, especially with only three weeks left before having to deliver the thing. Because now there’s just a genuine question of, like, is there enough time to be able to do this? I don’t know. Don’t have the answer for that. But I know what needs to be done, and now it’s just a matter of doing the work. So here we are.

I wanted to share this with you because this is the thing that I’m wrestling with at this moment, in this week. And, yeah, if I struggle with it, then there’s a good chance that maybe you’ve struggled with it in your personal life. So hope this brings you some value. As always, guys and gals, thanks for being here. We’ll catch you in the next episode, but until then, stay hyper focused.