I am re-posting a few paragraphs from my friend Michael Karnjanaprakorn’s most recent post: A New Path.
Michael’s doing some exciting stuff with All Day Buffet and I wish him the best!
…A couple of weeks ago, I had breakfast with Annie Duke (professional poker player) who told me a great life lesson and story around sunk costs.Â In the most basic terms, the concept is used in making good decisions (which is the secret to the success of professional poker players).Â Wikipedia defines sunk costs as â€œcosts that cannot be recovered once they have been incurred.â€�
So, for example, if you’re waiting in line at the grocery store, and the line next to you moves faster, most people won’t hop over to the faster line because of the time they â€œinvestedâ€� in their current line.Â This makes absolutely no sense as anything invested in your past shouldn’t influence your future.Â Another example revolves around relationships.Â Most people stay together because they’ve â€œbeen together for the past five years.â€�Â Again, people shouldn’t make decisions based on past investments.Â And if you’re wondering how this applies back to poker.Â Once you make a bet and put your chips in the middle, that money is no longer yours (so you shouldn’t make bad decisions on getting it back).
Instead, you should look toward the future and look at all the different paths, opportunities, and possibilities presented to you right now.Â The sky is the limit.Â Everything in your past gets you to this point but it’s up to you to make the best possible decision on which path you want to go down. And that’s where gut intuition, happiness, and the rest of my cliche life principles come into play.Â Because at the end of the day, if you make the right decision for yourself, there’s no way that it’s a bad one!
Update: More on Sunk Costs by Seth Godin