Decision Making and the Sunk Cost Effect

Pondering my own resumè of half a year sailing and photographing my way around the Greek Islands I found that things didn’t quite work out as planned and I needed to make a change. And in kicked an old friend: the sunk-cost effect.

Ever heard of it? In all likelihood you have become one of its many involuntary witnesses and/or victims before. It’s a wicked behavioural glitch often observed in different contexts such as business, project management, relationships or, for that matter, sabbaticals.

For example let us say that a business has decided to invest millions into the development of a new product. Then, as sometimes happens, somewhere along the road it is realized that the market has changed and that the particular product is unlikely to find any buyers. If this point of realization is far enough down the road toward the completion of its development, a common reaction is to say: “We have already sunk 90% of our budgeted costs into the development of the new product, so if we stopped now, these would be wasted and the project declared a failure. To avoid the waste and secure the success all it needs is another 10% expenditure – which we will therefore invest and bring the project to completion.”

This is, of course, confusing the completion of the project as such and the projects’ intended benefit. Measured by the latter the project already is a failure at that point and no further expenditure will change that. What’s worse, any further expenditure will be pointless waste without any benefits.
Pointless? Without benefits? Well, that’s true with respect to the original intentions, but the further expenditure, albeit useless to the intended benefit, has other merits: by transferring the measurement of success to completion (“we finished it”) rather than outcome (“the result is beneficial”) this secures a false sense of success. Plus it avoids the shame of acknowledging failure. So a double win, hurray!
(If you really want to know more: Arkes, H. R. & Blumer, C. (1985). The psychology of sunk cost. Organizational Behavior and Human Decision Processes.)

Hang on, I’m digressing. Or rather, I’m not. Because I was very close to doing all of the above in by-the-book-silly-case-study fashion. If I had continued sailing through Greece for another couple of months, I would indeed have successfully completed my photography-cum-sailing sabbatical, granted, but really it would have been an unsatisfactory continuation of the compromise that I had realised it to be.

So, a somewhat painful decision was made: I would end my journey in Greece, sell IDA and pursue my photographic endeavours elsewhere.

After a short visit to Vienna I let the return flight to Athens take off without me and instead hopped into my small camper van, drove in record time to Greece where I would take IDA into a shipyard and out of the water to get her ready for sale. Then embark onto an altogether different journey.

On arrival in Aegina things suddenly moved breathtakingly quickly: I was informed by the shipyard owner that the weather was turning bad and I should make my way over asap. And by that he meant: right now! I had literally just stepped out of the van after a two-day drive and hadn’t even stepped onto the boat yet when my friend Sebastien of SY YALLA, who generously had looked after IDA during my absence, agreed to accompany me on the short leg to the shipyard. In a matter of minutes we were motoring out of the harbour, and, true, the wind had picked up quite a bit and was blowing us with an exhilarating 6 Bft towards the northern tip of Aegina.
That was when the realization hit hard that I was on my last sailing trip with IDA, that it was the last time to have started the engine, hoisted the sails. I am helplessly romantic like that, I know. I was truly glad not to have been alone in those couple of hours but in the company of a sympathetic fellow sailor.

Before I could realise it I had manoeuvred IDA into the shipyards dock, right over the crane’s belts that were already waiting like impatient fingers, itching to hoist her out of her element. The moment the engine turned silent for its last time IDA was lifted into the air and carried over to her place on the dry, with me all the while standing somewhat helplessly and confused on her deck, not really fully grasping what was happening.

And suddenly, with my floating home of half a year sitting hard and dry, my sailing adventure was over.
And another about to begin.

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A short ferry ride to Aegina

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Selfiemania!

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The skipper on his last leg. Don’t know whose belly that is.

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The body language says it all

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A rather tight fit, especially when entering with 6 Bft side winds and quite some swell!

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Out of her depth

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IDA over land, feels kind of weird…

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That’s how she stayed overnight before being taken to her proper place on land

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Sebastien from SY YALLA – without his help IDA would have had a hard time in Aegina – and me, too.

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…and if nothing else helps, there’s always Greek house wine to smooth out the edges.

 

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