Saving The Future Titanic

?

Saving The Future Titanic

Years ago, me and a friend decided to go to a concert of a very good musical band in vogue. For bad weather, the band could not fly in from Karachi to Islamabad and a replacement singer was arranged, rather it was a number of singers to entertain the audience. And, the replacement was awful. My stamina could no longer resist, and I almost had to shout to my friend because of the high noise music, “lets go”. And he stared me back like I had given him some bad news. But we just came here spending ?2000 rupees (this was a significant amount back in 2000). “But, it doesn’t make a difference. We sit here or leave, the amount gone won’t be back in our pockets. Lets save the evening we are left with".

Fast forward 22 years. Addressing my social media manager for a 100 thousand marketing campaign running over two months, with no significant response, I asked him to shut it down. “But we have spend a 100k to it already? How can we leave it just like that”.

While listening from a friend practicing in mental health and psychotherapy, who shared his experience with a guy depressed and devasted because he had reached a point in marriage, where abuse and door slamming had become a daily routine. At one point, my friend, coming to the conclusion that it would be better for the mental health of both partners to get a divorce, he asked his client to leave her and put it straight on the table: “How can I, we have spent so much wonderful years together?”.

The above examples are reflection of a thinking Bias known as Sunk Costs Bias. If a ship is sunk, you cannot do much about it. Bringing it to the surface will perhaps cost five times more than buying a new one.

Though some how we have, as human beings taught and trained our brains to get attached to the efforts, and enjoyments and the investments, and people, we have spent time with, assuming they will never change.

The sunk cost attachment becomes further vicious, if we have spent time, money, energy and love for it. This sunk investment becomes our biggest reason to carry on one more time, getting more investments from us. The greater the investments, the greater the attachment and we are caught up in a vicious unending cycle of attachment to sunk cost.

Often, decision makers in business, can see their investments have been lost, but they keep on for the sake of consistency, ego and a self-assumed credibility. How would the market respond, if we leave the project, then and there in the middle?

The same phenomenon is perhaps responsible for some of the biggest losses in shares market. Remember, the cost of purchase does not matter. The acquisition price won’t be change. You cannot go back in the past and change it. What matters, and what will matter, is how the stock or its alternative stocks will perform in future. Ironically, it is the reverse: investors tend to get more attached to an investment, the more it loses its value.

The US government kept on investing in Afghanistan, knowing they were defeated. Finally after 20 years and estimated US $1.5 trillion, they are out. They could have saved the huge reserves, the death toll, the embarrassment and the budget deficit back in their home, had the not fallen for this trap.

The sad fact is business opportunities, markets, industries, relationships and people continuously change and we have to learn to live and learn to survive with or without them.

Departing from someone we love because of death, or leaving a loved one because of infidelity is huge pain. Seeing your dream business collapsing is a great emotional setback, but to keep on reminding ourselves that equally rather more important is the future.

It is always good to be able to continue with a loved one after a huge turmoil in relationship, or to continue holding stocks, but the reasons do not have to be hooked in the past like justifying the irrecoverable resourced still stuck to it.

If you can see your investment ship is turning into future Titanic, better get off board soon. Or else come up with better reasons, if you wish to continue.

Remember one thing: Past is not equal to the Future.

See things clearly, with clarity.

Blessings

Hassan Bukhari (pen name)

Syed Hassan Abbas

Chief Editor

CLARITY Newsletter

?