Do you think you make smart, rational decisions most of the time?
We’ve been chatting in the office this month about the ‘sunk cost fallacy’. Specifically, in relation to how much time we spend when it comes to fixing a piece of hardware – and whether it’s truly worth the investment of time.
There is a general misconception that you make rational decisions based on the future value of objects, assets, and experiences. However, the truth is that your decisions can be tainted by the emotional outlays you accumulate over time – and the more you invest in something, the harder it becomes to abandon it.
Humans are subconsciously programmed to avoid failures of any kind, and the prospect of loss can be a more powerful motivator on your behaviour than the promise of gains. In fact, several studies claim that the possible pay-off needs to be double the potential loss for many people to make a change.
As an example, have you ever been to the cinema and realised, 15 minutes into a film, that you’re just not going to enjoy it, yet you stay to the end because you’ve paid for the tickets? Or, you’ve bought a sandwich that tasted pretty bland but have still eaten the whole thing because you were hungry and didn’t want to waste the money or food?
While minor, these are great examples of the ‘sunk cost fallacy’ – almost like payments or investments that can never be recovered or enjoyed. A computer program with logical process would never ‘make a decision’ based on what’s already been invested, but as an emotional human we usually do.
Perhaps a more relatable – but less talked about – example is of a long-term relationship, whether that be a business one or a personal one. If we focus on the corporate relationship, it may be a service provider you’ve had a contract with for a while. You’ve spent months, or even years, devoting time and money to the partnership – but, it’s not quite living up to expectations.
Things might be okay – but is this really, well, okay? It might have all started well, but you’re having some concerns and the third-party doesn’t seem as invested in the alliance as much as you are, or even worse, the service has deteriorated yet you’re not privy to any explanation why.
At the same time, the thought of moving to a new provider might not really seem like an option. You’ve invested into the partnership, understand how each other works, and they know your business well. All this can make the fears associated with the potential upheaval of moving to a new supplier simply too ‘unknown’ to contemplate changing.
However, if we look at it from a different angle; time has passed, the money and energy has been spent and you’ll never get any of it back. If you can accept this, you’ll be able to make peace with what’s gone before and move on to something that will serve you better in the future.
This attitude and awareness will inevitably help you to make better decisions moving forward, and it’s something we embrace at Q2Q – both internally across our own practices, and when advising customers on the right hardware too.
The ‘sunk cost fallacy’ manifests itself in many ways amongst our customers – old and new – but we regularly receive feedback that they wished they had changed IT support provider months, or even years ago.
Is there something within your business that you’re clinging on to that you know you need to let go of? Do you feel like you’ve invested too much time or money to simply pull the plug?
While our bread and butter is IT support, if you’d like to chat about the unique approach we take to tech services at Q2Q, or simply invest some time in making connections with an SME owner, the kettle is always on at our HQ!
