The Tragedy of Sunk Costs

"I've spent so much money. Now I have to make it work."

Nothing clouds the judgment of a founder more than sunk cost fallacy.

The sunk cost fallacy is a cognitive bias that causes people to continue a course of action even when it's no longer beneficial.

Most entrepreneurs start something with a big vision.

They spend time, energy effort building that thing.

Yet when the market doesn't respond, they try to keep pushing.

Because they've already invested so much.

It makes things harder to let go.

And if its harder to let go.

You've become emotional.

If you've become emotional, you don't run a business.

You run a REALLY EXPENSIVE hobby.

The sunk cost fallacy can come from the tiniest things.

Paying a certain vendor some amount.

And now you have to make it work because you've invested money.

Getting a new office.

Now you have invested so much and you have to run behind revenues to pay rent.

Hiring a big team.

You wanted to have a big team and you hired a bunch of people.

Now you keep chasing revenues to make ends meet.

You've got to keep your emotions aside and keep building a lean and mean business.

Its easier said than done though.

What do you think?

Cheers 

Jayant “Dealing with sunk costs” Padhi

Co-founder

Remote Closers

PixelTrack

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