Know When to Fold ‘em
KARL R. LAPAN, PRESIDENT AND CEO OF THE NIIC
We’ve all been there. We’ve continued to pursue a fledgling project just because we’ve put in a significant amount of time, money or other resources into it, only to watch it start to unravel before our eyes. It would be foolish to walk away with so much invested, right?
If you can relate, you’ve probably subscribed to the sunk-cost fallacy at some point. This is the bias that anything you’ve already invested in deserves greater investment—even if it was questionable in the first place, and also if the investment is unlikely to become fruitful. This attitude can result in a downward spiral of losing money from bad deals or projects we refuse to abandon, even if the writing is on the wall.
But how do we avoid falling into this trap in the first place? Following are a few helpful ways to recognize this bias before it’s too late:
Fail forward, faster, and smarter. Failures don’t have to define people. A quick failure, in fact, can be a blessing in disguise but it saves us from dumping more resources into something that’s not viable. Reframe what failure is. Finding out that something isn’t right, or it’s the wrong time for your idea to work is not failure, it is adaptive learning.
Know your value. What is your value proposition? How are you different from your competition? If you don’t have a defined USP, you’ll have a hard time sustaining a credible and successful business model.
Separate your ego from business decisions. People notice and care less than you think. Are you making decisions based on what other people think, or what you know in your heart is the right thing to do? At the end of the day, your business will benefit from sound decision making, not emotionally charged ones. Making decisions sooner might just give you more peace of mind and less heartache in the long run.
Don’t go at it alone. Have a brain trust and an inner circle of advisors. Involve multiple stakeholders in the decision-making process, so that you reap the benefit of diverse perspectives and ideas to ensure your decisions are well-informed and well-researched. Surround yourself with smart people.
When we learn to remove our bias from business decisions, we can indeed move forward faster and smarter. Sometimes ideas don’t work out—and that’s ok. Not every idea should see the light of day.
As Kenny Rogers said, “You’ve got to know when to hold ’em/Know when to fold ’em/Know when to walk away/And know when to run.” With respect to your latest ideas, are you walking away from them, running away, holding on to them or folding (giving up on) them?