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Hey, everybody,
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welcome to The Leadership
Tip of the Week.
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I'm your host, Max Yao, bringing to you
your weekly programme designed
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to help you become and remain the
leader everybody trusts and respects.
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Unfortunately, that's not
what most people do.
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Have you ever found yourself
into a situation that you disliked but
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decided that you have to continue with
it because you have been too far?
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Typical example is an IT project
or a new product launch in which
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you've made
significant investments
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in time and money
without success.
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But that you
keep alive.
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This is an example of what psychologists
call Sunk Cost fallacy or Sunk Cost trap.
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The Sunk Cost is a cost that has already
been incurred and cannot be recovered.
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The Sunk Cost fallacy is the tendency
that most of us have to continue
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an endeavour once an
investment in money,
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effort, or time has
been made, often
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even if we will not start the activity
and we're not already invested in it.
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According to Daniel Kahnemanā€™s
Loss Aversion Theory:
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When faced with the decision
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to stop a failing activity
in which we have
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already made an
important investment,
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we tend to assign disproportionate
value to past costs
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versus future
cost and benefits.
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We also fall into
the Sunk Cost trap
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because we have a hard time
admitting that we've made bad decisions.
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The more a person
feels that he,
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or she, will be at fault for the loss
represented by the sunk costs,
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the more he or she is
likely to fall into this trap.
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Holding onto previously invested
time, effort, and money
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because of the sunk cost trap,
should not be confused
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with being persistent, which is a key
quality of successful people.
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The difference between the two is a
perspective that supports the action.
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In the case of the sunk cost trap, past
investments are over considered,
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and the decision maker has a
hard time letting go of the past.
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When you are persistent, you focus on the
future and continuously evaluate your action
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to ensure that it is aligned
with your master intention.
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Persistence allows you
to continue your efforts
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in spite of fatigue or frustration
from early failures.
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This is your leadership tip for this week:
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When the answer
is consistently no?
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Then you know
it's time to stop.
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I wish you a
very good week.
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I'll see you again next Monday
for another leadership tip.
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Make sure you subscribe below
now and be first to receive it.
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Until then, take responsibility
for everything that happens to
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you and be committed
to serving others.
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That's how you become and remain the
leader everybody trusts and respects.
