At lunchtime, I had a bit of a dilemma: eat the grapefruit, which was what I really wanted to eat, or eat some strawberries, which are more expensive and which spoil faster.
I felt slightly guilty about letting the strawberries potentially spoil, so I grabbed them.
But then I heard in my mind the words of my old University of Texas economics professor: “Sunk costs are forever sunk!”
That simple sentence means that if you’ve paid for something, that decision is done, and it should not emotionally effect the decisions you make now. I paid for the strawberries, and that’s not going to change, whether I eat them or not.
What’s my goal? A pleasant meal. The meal would be nicer with grapefruit rather than with strawberries, given my current mood. So I should not let the cost of the strawberries drive my decision.
We encounter this in small business all the time.
“I spent a fortune to hire that guy — I can’t fire him now!”
“We spent a lot for that machine. I don’t care that it’s worse than what we did before, we can’t afford to just stop using it.”
“We’ve invested years in that product…we’ve got to make it profitable.”
No. No. No.
Sunk costs are forever sunk. What we chose to do in the past — what we spent in the past — doesn’t matter now. What we choose to do now should be what will advance our goals now.
Oh and by the way, I put the strawberries back in the fridge and ate the grapefruit.