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Sunk costs and opportunity costs

Sunk costs, opportunity costsWell, it’s a wrap…. almost. We’re shipping boxes of binders, exhibits, books, and hundreds and hundreds of pages of documents tomorrow to the accrediting commission, and now it’s a waiting game. It’s been a grueling year – the first application last spring, and now this past fall, responding to their comments and concerns, we had to significantly revise and re-submit.

We hit some real stumbling blocks, some moments when we were all tempted, seriously tempted, to just throw up our hands and walk away. The project was a total meditation on power and effort, of digging deep and pushing forward. Yet at each obstacle, the question came up, is it worth it?

It’s extremely hard to know, because of the psychology (and economics) of sunk cost and opportunity cost. Sunk cost is an economic term for the money or sweat equity you’ve put into something. And opportunity cost is about the future: for every minute or dollar you spend on something, there’s something else you’re not spending it on. And it’s extremely hard to tell which is the better route. Knowing when to push and when it’s not worth it is extremely hard, psychologically. We get attached all the time, to our detriment, because of sunk costs: relationships, jobs, habits, military campaigns, etc.

With this project we had to consider each time we hit an obstacle (and sometimes it seemed to happen daily), what is the future benefit? Can we imagine it? Can we weigh this level of effort against the future cost? How do we know we’re not just hanging on because of sunk cost?

Working with change of any kind, whether with people or systems, understanding the psychology of investment and loss, is critical. Just as I was cooking on this all, my friend Carol Zahner, sent me this link, The Upside of Quitting.

Bit of this, bit of that

While it’s been quiet on the blog front, it’s been a storm of ideas, activities and projects in the back office, so to speak. I just arrived down in Yachats for my much anticipated and much needed end of year retreat, and I’ve got several projects I’m looking forward to spending time with. Here’s a little overview:

  • I’m fascinated by Scott Miller’s work, His research into what works in psychotherapy raises a lot of questions about change and growth, specifically why and how do people change? It seems that rather than any one modality, there are a few ‘meta-therapeutic’ factors that account for efficacy in psychotherapy. Part of what prompts me to look at this more closely is my interest in the future of psychotherapy. Will psychotherapy endure as a profession, or will its ideas and methods become absorbed into the larger discourse of change and learning?
  • Kids and leadership! For my work with the Dreamers, the 4th graders I’m sponsoring as part of the I Have a Dream Foundation, I’m starting a “Kids City Club.” Field trips to city hall, the police, local TV station are all part of a project on helping kids understand how the government works, and how the city runs. Part of this will also include learning about the local city council’s proposal to revitalize their neighborhood, and then making a presentation to the city council on what changes they’d like to see.
  • Happy to see one of my favorite authors, Doris Kearns Goodwin, get such great publicity of late. Also happy to see how much history is referred to in current events. Just before the election, while traveling overseas, I read her book on FDR, Eleanor and the home front during the war: No Ordinary Time. Tremendous book, and like Team of Rivals, eerily relevant for the current economic crisis.
  • Just one thing more on Team of Rivals. When reporters asked Obama how he would avoid having a “clash of rivals” rather than a “team of rivals,” he said he wanted “vigorous debate” as he was “a strong believer in strong personalities and strong opinions.” He cited the dangers of groupthink, where all data confirm the theories and ideas already agreed upon. I’m happy to see such a discussion on the front page about the value of and necessity for conflict.

Leadership Development, Emotional Intelligence and Surviving the Fog of War

Photos taken of U.S. Presidents before and after their terms in office show what a huge toll that job takes on the body. In the four years between inauguration day and the end of term, Presidents often look like they’ve aged 10, not just 4 years.

It’s a grueling job, with a lot of pressure. What we see on the outside is only the tip of the iceberg. Many of us, while not quite as high profile, are in leadership positions that put a terrible strain on mind and body. What happens to the body and mind under the weight of public pressure and tensions of leadership? What toll does public attack and humiliation take on the mind and emotions? What about our energy and drive, after plans and ambitions are torpedoed by opposition, sunk by the weight of inaction, or stalled by endless rounds of skeptical questioning? (more…)