You may have noticed a severe lack of articles from me over the past 2 months. Have no fear, I haven’t forgotten how to write. In fact I have just completed the first draft of my first, so far untitled, book. As I work with my editor and consider my publishing options I will be releasing bits and pieces as blog articles for your feedback. Enjoy.

In poker there is a term sunk cost. It refers to money you have already bet that can not be recovered unless you win the hand. Good poker players know that you need to bet based on the following factors: Your odds of winning, how much you will win, and how much you must bet to play. Each bet must be looked at as an individual decision with no emotional attachment to money previously bet. The idea is that often players will keep betting and lose significant money because they are emotionally attached to money they have already bet when they should actually cut their loses and accept their previous bets as a sunk cost. 

I learnt about this poker rule during my days living in my Fraternity days and have since applied it to all aspects of my life. It is one of the most important lessons I have to teach you and will fundamentally change how you view business and relationships. Everyday is a new bet.

Are you firm with your romantic break ups or reflective of an elastic band? Many couples will “break up” and get back together dozens of times in what I would consider a doomed relationship. There are many reasons people do this: One of the main reasons is the idea that they have invested too much time in the relationship to just let it end. I have news for you: If you consider the time you spend with your spouse, lover, boyfriend or girlfriend an investment you should take significant time to reflect on the quality of your relationship. Love is when you enjoy spending time with the other person and wouldn’t rather be anywhere else. If this is the case, there isn’t even a need to apply this concept of invested time because the time spent with a partner was the most enjoyable use of your time at the moment. When this is no longer the case, it is time to move on.

If your end goal is simply to get married to someone, to have someone and therefore not die alone then your perspective of time invested is a valid one. You have invested significant time into a relationship and when it is apparent that the relationship is no longer successful you must consider this a sunk cost and cut yourself loose!

I applied this lesson recently when facing some difficult lifestyle decisions. I spent the bulk of 2008 living, as most of us do, beyond my meanings with little anticipation of an approaching economic shift. In December of 2008 I made the tough choice to do a 180 and rapidly reduce my living expenses and outstanding debts. One of the largest debt components was $12,500 still owed for personal development courses not yet taken. I signed up for the courses on credit, it was no interest no payments for 6 months how could I resist? Despite a despicable refund policy that would cost me thousands I decided owing $5000 and getting nothing in return was better than owing $12,500 and taking an array of courses. The $5000 was a sunk cost, there was no way to recover it. What I had to consider was whether I should spend an additional $7,500 on courses now that my priority had shifted away from spending. Looking at it in these eyes the decision was easy and I sought a refund. If I looked at the decision simply as spending $5000 for nothing or $12,500 for $12,500 worth of courses I would not have made the same decision. Looking at it from the sunk cost perspective left me in a far better financial situation.

The principal can and should be applied to one’s career. The idea that a career change is impossible after a certain age or amount of time in an industry is ludicrous. The most prized assets in the business world are leadership and people abilities which are highly transferable skills. A little gray hair never hurt in the promotions department either.

Looking at decisions through the lenses of sunk cost forces me to live in the present. It is never too late to change your path. The past is the past and the future is completely unrelated to it. What you have done, the time you have invested in a particular job, relationship or business is not relevant for your current decisions. Your actions should be guided by what will make you happiest and most fulfilled in the present moment.

I work with entrepreneurs to provide them with the confidence, focus and strategies needed to successfully build their first business.

Take Action Today,

Dan Johnston.