Life Is Too Short To Worship Sunk Costs

Morgan Housel wrote a good set of notes from a talk Daniel Kahneman did in early 2017 (HERE).

I thought that Kahneman’s words on persistence are very instructive for investors, business leaders and entrepreneurs. Instead of focusing on the positive aspects of persistence, he spoke about its negative aspects and associated sunk costs.

You want to treat sunk costs and persistence like Kahneman. Such a mentality, I’ll mention below, has helped me.

First, Kahneman’s words:

“When I work I have no sunk costs. I like changing my mind. Some people really don’t like it but for me changing my mind is a thrill. It’s an indication that I’m learning something. So I have no sunk costs in the sense that I can walk away from an idea that I’ve worked on for a year if I can see a better idea. It’s a good attitude for a researcher. The main track that young researchers fall into is sunk costs. They get to work on a project that doesn’t work and that is not promising but they keep at it. I think too much persistence can be bad for you in the intellectual world.”

If you look through the lens of opportunity costs, each project, or investment, you or your organization can be involved in has a different value. Yet, you don’t know all your options in the beginning and their true value. It’s fine to experiment time and money if something interests you, but you have to be willing to change your mind when something better comes around. If you don’t change, you’re giving up on better opportunities that will more than likely lead to regret in the future.

Sometimes it is best to relate with a personal story. I’ve been utilizing this strategy my whole life to decent results.

I wanted to be a famous guitarist, a rock star. From my 10th birthday on-wards I spent 1,000s of hours practicing. It looked promising, and I loved doing it.

I took it to the next step and attended Berklee College of Music. Once there I quickly felt that things weren’t what I envisioned. There were others who were better prepared, more disciplined and had better connections. It didn’t help the gap between the top musical performers and bottom was getting bigger. Not to mention that the rock or jazz that I loved playing were decades out of style.

Even though I invested all of this time into the guitar, my chances were slim to nil on making a decent living playing music. I could have persisted, but business and investing came into my life.

I gave up aspiring to be a star guitarist and haven’t regretted it one iota.

The opportunity was much better in investing and business, but I had to fail at many other things first. I spent time studying to become a personal trainer. I got certifications, worked at a gym and put in many hours. It wasn’t for me.

I tried living in South Korea for a few years learning the language, working there, even marrying a woman there for a very short time, but gave up all that, too. That experience taught me exactly what I wanted from life in terms of a family and have exactly that right now.

Life is too short to persist in something with a lower marginal value, no matter how much time or money you’ve put into it. Too many people die with their “music” still unplayed. Don’t get in the habit of feeling like you have something to lose when something better comes around. Live without sunk costs.


If you enjoyed this article, you should become an Intelligent Fanatics member. As a member, you get our current and future Intelligent Fanatics books and case studies for free, as well as the ability to participate here on our community. Join Us.

5 Likes

This is beautiful Sean… Sunk cost as a concept is not something that is easily understood… I do not think I understand it well yet…This post is quite helpful…

2 Likes

Thanks @rohithpottigmail-com.

I think a hard but fundamentally important question to ask ourselves is am I sisyphusing (I just coined the term :upside_down_face:)? You know acting like the mythological Sisyphus struggling perpetually to push a boulder up a hill without hope of success.

sisiphus

The challenge is that almost everything worth doing takes persistence, but you need to know what is worth persisting and what isn’t. The answer is different for everyone. I guess it comes down to self-awareness. You need to know your strengths/weaknesses. I think deep down I couldn’t see myself going all in on music, or that relationship or those other paths. I could forsee those paths leading to a life of eternal punishment.

While I can’t speak directly for others - only from my personal experience and reading/chats with others who lived without sunk costs - I’ve followed a feeling with my path, relationships and habits. The feeling is difficult to define - like culture of a company. As Herb Kelleher said: “it’s somewhat akin to the Supreme Court’s definition of pornography. You know it when you see it, but it’s kind of hard to define.”

Of course looking at the successful paths of others will help determine which path might be more valuable in the whole scheme of things than another.

And to get there we should be less like Sisyphus and more like Proteus. Proteus was the god of “elusive sea change”. Proteus, like water, could change into any form. Such adaptability is exact the trait that has led to long-term success in business, biology and elsewhere.

Proteus-Alciato

2 Likes

I’d be curious to hear other people’s thoughts on this.

1 Like

Perfect timing for this article and i can relate it with my personal story.

I have already mentioned in the introduction that i am a fitness fanatic and have done 2 Ironman Triathlons.
For past 1 year i have been preparing for Ultraman (spending 20 - 30 hours every week in Swim - Bike - Run along with full time job) and i signed up for Ultraman Canada end of July 2019. I believe less than 10 people out of 1.3 billion people in India have done this.

Just to give you some perspective - Kind of crazy training i was doing
April 19 - Swim 6 km (100’s of laps in 17m pool) , Run Drills + 1.5km swim again in the evening
April 20 - Swim 2 km + 5.25 hrs bike on Indoor trainer
April 21 - Run 8k in the morning + Run 25K in the evening.

April 22nd - Blessed with a baby boy

May 14th - Cancelled Ultraman reservations and dropped the idea of attempting this year. (Few hours before this article :slight_smile: )

Between April 22nd and May 14th,
i have been asking myself if it’s worth doing Ultraman just because it’s my passion and cost of doing Ultraman is less time with my family for few more months, my family will have to look after new born, support me and they may get frustrated and tired.

For now, i have decided following

  • Help and enjoy time with new born and look after my 7 year old daughter as this time will never come again.
  • If Fitness is my real passion and it’s deep within my heart, i will get another chance and i may do it few years down the line but need of the hour is to support family.

so, i am down from 30 hours per week training to almost zero and waking up at nights to help my wife and look after new born. (Earlier plan was my mother will look after them but now she can rest and i am making sure she is going for workout in the morning. She is 60)

I am still observing emotional changes i am going through and let’s see what future holds.

4 Likes

:clap::clap::clap::clap::clap::clap::clap::clap::clap:

Thank you very much for sharing that. Perfect example and you deserve a pat on the back for choosing that decision. You will not regret it later.

@saurabhahuja I’m sure the financial investment for the race was large too. A buddy of mine raced 4 Ironmans and spent $1,000s on bike and other gear. So I’m sure that made the decision that make harder.

2 Likes

That’s awesome @saurabhahuja… It must have been a very difficult decision…
I have a brother-in-law who is similarly passionate about running… The interesting thing is he got better after his kids were born… He is an involved dad and does his training around his kids’ schedule… And today he is probably running the best he has ever run…
I wondered the reason and figured this article by Sean could be the answer…Balance Is Underrated

2 Likes

I am not on Twitter but there are a couple of people whose tweets I check out once in a while… One of them is ‘The Ancient Sage’ whose tweets yesterday were beautiful I thought:

"If you want to learn, observe yourself for just a single day. You will learn more this way than you can by reading a thousand books.

This learning is more effective because it comes from direct experience. It opens your eyes in a way that second-hand bookish knowledge never can."

"Uncompromising self honesty is the key to lasting self transformation.

Notice how you are unconsciously deceiving yourself all the time. Become more and more aware of it.

If you relentlessly expose yourself to truth, you cannot fail to undergo profound transformation.

4 Likes

@seaniddings That’s another dimension to my passion :slight_smile:
For every event like this, i spend around $10000 to $15000 as i take my family along with me. In the past 2 events, first week is Ironman and second week is vacation
Ironman Sweden - 2016 - and Vacation in Italy - Wife and daughter
Ironman Boulder - 2017 - and Vacation in Vegas + LA - Disney land, universal studio + lego land - Wife + Daughter + Parents

I spend money luxuriously during these events and so far i have spent $15K 2 times in 2 weeks and on the contrary i don’t eat/drink outside and save money. I just have 2 jeans and don’t waste money on clothes are few examples.

If i deep dive, It took me 6 years to do my first Ironman (4 years in Training and additional 2 years in arranging finances). This $15K is extra money that i need to fulfill my passion.

Further, I was a lower middle class guy, stayed with parents throughout my life (33 years) and was doing a normal software engineer job for past 9 years in the same company.
I first switched my job in May 2014 and joined Amazon, Delhi India with the thought that extra money that i will get as salary, i will spend that on my passion for Ironman.

May 2016, I moved to Amazon Seattle just to pursue my passion for Ironman (people still think i moved because of career :slight_smile: ) and i actually got to know Amazon gives $15K as relocation and i got excited (you know why - see $15K) and within 3 months of moving i went to Sweden and did my first Ironman.

June 2017, my parents visited USA and i did my Second Ironman in Boulder, Colorado
Finances this time:
Amazon shares got multiplied, that’s only time i sold few Amazon shares to pursue my passion otherwise i have been holding Amazon shares since it was $300.

After second Ironman, my family said, we are done, we can no longer support you in your madness and we all were physically, mentally and financially exhausted.

But looks like i have deep passion for this stuff. So few months after 2nd Ironman, i asked my wife casually if i get this much salary (X - not mentioning X but it’s 40% increase over my current salary) would you allow me to do Ultraman and she said yes casually… first get it and then we will see. I took that seriously, I studied for an year and finally changed my Job in August 2018 and got that much Salary :slight_smile: and since then i was preparing for Ultraman.

Following my passion has given me a lot and i have come very far

  • Since, i needed money that i can waste/throw on my passion, i started reading how people make money and read Warren Buffett, Charlie Munger, Safal Niveshak, Mohnish Pabrai, Prof. Bakshi and few others and invested all my money in markets. I.e. the reason i accidentally came across this community and joined this community.

  • I have next 5 years, 8 years and 20 years financial plans made. I should get Financial freedom in 8 years and 20 years is when i will have some serious amount of money. I am just executing the blue print i already have.

  • I need financial independence so that i can pursue my passion.

  • i think about opening sports academy in India then fitness academy for Senior citizens or may be Fitness Clubs (think similar to Toastmasters club) and then i think about if kids need education before i open sports academy. By the way all this i want to do 20 years from now when i will have sufficient amount of money and it’s all easy i just have to make sure it’s compounding :slight_smile:

  • I don’t know but when i observe myself, i can wake up at 4am just for this passion and it’s difficult to wake at 4am for other things (like study)

  • Philosophy that drive me

    • Life is all about compounding Health, Wealth and Happiness (Happiness we get from meaningful relationships and Growth and following your passion)
    • Life is all about Running and Reading

Stuff that i have just mentioned are highlights of my journey so far and let’s see how far i will be able to go.

@rohithpottigmail-com
I have just postponed the idea of doing Ultraman and i believe in preparation. I will do it in future as i know something within me will keep bugging me and push me to do and follow my passion and so far i have shaken everything around me just to follow my passion and dreams.
I learned swimming few years back just to complete Triathlons and now i have confidence of swimming 10 km ( :slight_smile: only free style :))

This is the first time i am taking a step back and sometimes it’s good to take a step back to move ten steps ahead.
I think about Fitness revolution in India and i don’t know how far i would be able to go.

Example that i want to give to this world is you can do extra ordinary things with a normal life. That’s where the article “Balance is underrated” comes into picture.
I divided my day in 4 chunks
4 to 7am - Workout + passion
7 to 9am - Family Time + chores
9 - 5pm - Office Time
5 - 8pm - Family Time

and i used to struggle only during transition

I have a full time day job and now 2 kids and still i want to and will do Ultraman.
Ultraman is just compounding Health
Then i am learning investing and working hard for Wealth.
Trying to compound my relations.I am married for past 10 years and i seriously asked my wife if our love got better or worse. Six months back i got the answer it’s reduced to 80% but last week it’s back to 100% and she is super happy :slight_smile:
I am teaching my daughter Maths now a days and of course looking after my new born at night (he is sleeping right now :))
I am trying to make sure my parents stay Fit and motivating them to do walking/swimming.

I am trying to be unreasonable and demanding too much from life. Let’s see what all i am able to achieve in life.

Until now, i was in read only mode and i think i am writing after a long time.

Also, following are few things i am looking for

  1. I have to stop looking at share price everyday. I am bad at it.

  2. I am looking for mentors that can reduce the friction in following my dreams/passion.

If people have read this far. Thank you for reading, i really appreciate it.

My 2 cents
Saurabh

5 Likes

While making a decision on ending the activity or business or idea at hand and moving onto next idea, thought or activity does intuition play an important role?

If one has invested his energy or money on something, it is very difficult to separate oneself from the idea and intelligently see whether what one is doing is “Right” or “Wrong”. How would you suggest to proceed in such situation?

1 Like

The better my pattern database of Intelligent Fanatic giants (today and yesterday) - the better my ability has been to spot current opportunities & make better decisions/habits. It’s mere inversion. Work backwards on their success path to better find your own path forwards.

Most importantly -

Don’t be afraid of change.

There are two types of people who don’t change - the dead & fools. If you don’t want to be either, accept change with open arms.

Be fluid. Be honest with yourself, your current situation, habits and thoughts. Be brazen in changing your status quo.

Just look at @saurabhahuja’s example. He’d been dead or a fool - divorced - if he didn’t change his ways :slight_smile:

3 Likes

Thanks for sharing this Saurabh… Your story is quite inspiring…Each time I think I work hard I come across a story like this which shows me there is a long long way to go…There is a lot to learn from you…

3 Likes

@seaniddings @rohithpottigmail-com @iancassel
I would like to highlight the quote above and i believe that’s what people say “Fanatic” means and it comes from deep within me and looks like it’s natural.

Just to summarize
Now, when i look back i changed my entire world because of this

  • For the first time in my life, pull was so strong that i moved out of parental home (before that I stayed with my parents for 33 years and rejected better education opportunities, multiple offers outside of home town) and came to USA
  • I feel so strong about “Fitness” and that’s what i want to do even on last day of my life.
  • Since, Triathlons are expensive, thought of Financial Freedom came to my mind and i read so many books, watched 100’s of videos and trying to follow value investing principles.
  • I thought about leaving Full time job and create enough corpus to lasts for life time and keep doing this as Full Time and started thinking about how everyone can enjoy Health/Fitness and be more productive.
  • It comes naturally to me talk about this topic, otherwise stay quiet :slight_smile:

Now, i am thinking and keeping challenges in front of me before opting for Ultraman training again

  • Get Financial Independence (i have defined it. It’s $2.5 million including million dollar home). If i will have this much, my wife will never bug me or ask for Full time Job while i am out for run or following my passion :slight_smile: and i have a paper where she signed on this amount :slight_smile: few years ago :slight_smile:
  • Spend enough time with my kids. Look after my new born and Teach my daughter swim/bike/run and Maths
  • Help my wife in following her passion (Dance and Cooking) and she would go for full time and i just want to follow my dreams/passion.

These are all the actions and behavior that i have been doing and going through.

Looks like there is some deep inner desire in me that wants to do more and more in Fitness field.

I started 8 - 10 years ago with my first half marathon, then full marathons, ultra marathons, cycling brevest, Ironman Triathlons and now
Ultraman

And this time also when i decided to postpone doing Ultraman, i am physically ready but i have to fix lot of other things

  • I want my family to support and go with me. With 2 month old it’s difficult
  • Financial Cushion. I mean, i should have enough and i can spend/waste $15K in 2 weeks and don’t think about it.

And as of today i am working on meeting these pre-requisites before doing Ultraman.

If i know myself, my inner desire will keep looking for an opportunity to do Ultraman in next 5 years. Only future will tell if it’s true.

8 - 10 years from now
After financial independence and Ultraman, giving and helping others would come where i think about how can i help others in achieving their passion, Sports Academy, Fitness for everyone…
I don’t have detailed plan yet but that’s the high level game plan.

This is my WHY and i never thought about HOW and try to keep moving forward.

it reminds me a quote from Jeff Bezos
“You don’t choose your passion, your passion chooses you”

All the above mentioned points are real and that’s how i think and live my life each day and is to provide you data points.

Can you please comment on my behavior and thoughts so far based on your understanding of Intelligent Fanatics.
We all need mentors in life and i believe mentors acts as catalyst in achieving what you want to achieve(dreams/passion) faster.

Apologies for grammar errors/ less structure or poor writing but i hope i am able to convey my message.

1 Like

@saurabhahuja I think you’ve figured out your balance. That’s all that matters.

2 Likes

@seaniddings, this was very powerful. Thank you for sharing these very personal stories. It’s truly remarkable how much long-term success can be found by understanding, truly, who you really are. I agree with @rohithpottigmail-com and, similar to what he wrote, we fool ourselves constantly. It takes time and effort to learn how to un-fool thy self and therefore understand thy self, to increase your self-awareness, etc. There are so many ways to say shades of the same thing.

Understanding thy self brings that feeling @seaniddings talks about closer and closer towards the surface of thought. You can see it, but to define it to someone else…? Extremely hard.

What I have noticed - and I hope it is not a pre-requisite - is that most of those that have consistent and deep fluency of thy self have hit a true nadir at some point in their life. If they successfully navigate out of it, they typically learn valuable lessons that they carry for a lifetime.

I hit my nadir in 2018 and will never look back.

2 Likes

@rileynewport, I think you are right. Life gives us challenging rock bottom moments. They either define us or shape us. Those who get back up can move on with more clarity, prepared to try again. Be defined by your rock bottom and you become one who is dead at 25 and not buried until 75.

1 Like