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Sunk Costs

business and it consulting firms

Farmers and hunters in third-world countries have been capturing monkeys for centuries. To catch a monkey, you have to trap it. Here’s how it’s done: A farmer or hunter will take a gourd, or they’ll cut a small hole into a termite mound if they’re in Africa. The small hole they cut will be just big enough for the monkey to fit their hand through. Inside the gourd or the jar, they’ll put something the monkey craves.

Then they wait. Sooner or later a monkey will come by and smell the nuts, and they’ll want them. They’ll put their hand through the hole, grab a fistful of nuts, and then they’ll try to pull their hand back out. But they can’t. The hole is small enough to put their empty hand through, but not big enough for a hand clutching a fistful of nuts. They’re stuck.

Now, at this point, the monkey should realize, “Hey, I’m stuck, drop the nuts.” But they don’t. They want the nuts. They don’t want to surrender the nuts. So they pull and pull and pull, refusing to drop the nuts, and the hunter or farmer comes up behind and catches them.

If they just surrendered what they were holding on to, they could have been free. But because they refused to surrender, they lost their ultimate freedom.

I was at a seminar yesterday and the during the finance portion, the speaker talked about the concept of sunk costs. It got me thinking about the stuff we hold on to.

In economics and business decision-making, a sunk cost is a cost that has already been incurred and cannot be recovered.

What came to light was that this concept is not only applicable to business but also to everyday life.

Just like the monkey holding on to the nuts what are you holding on to? A simple example, is holding on to that suit or dress in the closet that you haven’t worn for years but you are reluctant to get rid of it? You say, “I can’t throw that away because I paid good money for it?” Or staying through the entire movie that you have determined is bad, because you hope/think it will get better? What is the cost of holding on to something that does not really matter? Storage, time, money, emotions? All precious things.

Here is an article for more information on sunk costs and how to overcome the feeling.

Get rid of something.

Have a great weekend.


About Friday Food for Thought (FFfT)

I frequently attend conferences and retreats on entrepreneurship and leadership and while I am away, the J2 team picks up the slack, allowing me to learn to be better at what I do. I wanted to share what I was learning with my team, so I created the weekly FFfT emails in November of 2015 and have been writing them ever since.

Before long, the J2 staff began sharing the FFfT emails with their friends and family and now other leaders have asked to be included, which led to the creation of this newsletter. I hope you enjoy!