How to get out of sinking ships and save yourself

One afternoon, I was trying my hand at making pakora at home. Pakora is a popular snack in India. It is prepared by chopping up some vegetables, dipping them in batter made of gram flour and deep frying them in oil.

I chopped up some onions and a small capsicum and carefully prepared the batter.

Heating up some oil in a pan, I dipped a piece of capsicum into the batter and gently slid it into the oil. I did this until all the slices of batter-coated capsicum were in the oil.

I had decided that I would dip the onions in the batter after the capsicum slices were fried.

I stirred the capsicum in the oil but for some strange reason the batter started to strip away from the capsicum and disintegrated in the pan! This was definitely not supposed to happen.

I read the label on the flour packet again. It said, ‘Fried gram flour’.

I eventually realised ‘Gram flour’ and ‘Fried gram flour’ are two completely different ingredients! <Facepalm>

I was annoyed, disappointed, upset and also quite hungry.

Instead of stopping, I did something impulsive. I dumped all the onion slices into the batter and fried them all too! Every single one. And just like the capsicum, the batter split away from the onion slices and I was left with chunks of batter and crisp fried onion rings!

And then I ate it all too!

It's as though I was overcome by this sweeping desire to finish what I'd started even if that meant things would end badly.

Why would a rational, sensible, intelligent individual do something like this?!

Before we get to the answer, let's consider another story.

Imagine you’ve invested a hundred thousand Rupees in an assortment of stocks. Let’s say fifty percent of those got you good returns after a while but the other half didn’t bring you anything. They’re losing money now — the numbers don’t lie.

You know the sensible thing to do is to cut your losses and pull your money out of those underperforming stocks. And yet, something inside you says those stocks will earn money someday. You've sunk too much money into them and it just feels too painful to give up at this stage.

You haven't got your money's worth, or you've come too far to quit or maybe it's just too painful to entertain the thought that walking away is the best thing to do.

This tendency to hold onto an old decision even if it’s bad for us is called the, ‘Sunk cost fallacy’.

I was first introduced to the idea of ‘sunk costs’ when I was a student of Advanced Management Accounting — a subject which has taught me as much about life as it has about cost analysis.

The sunk cost fallacy is so common we don't even notice it on most days. We keep giving our time, patience and attention to something that will never give us what we want. We may know on some level that it's time to move on, but the amount of time/effort/money we've invested in it makes it hard for us to do so. But the sad truth is that sticking to a failed route tenaciously is a surefire way to make things much worse.

Sunk costs don't just apply to the world of economics from where the term originates but to all spheres of life.

Hesitating to end a relationship because you've been together too long?

Not quitting a job you hate because you've spent too many years building a reputation there?

Afraid to switch lanes in career because you've spent too much time doing the one thing you're very good at?

All of these are ships. Ships that are sinking.

And it's time to get out.

Unlike real life ships where the danger of not getting off the sinking ship is vivid and obvious, ships involving sunk costs are much harder to spot.

Here are a few techniques I use to spot a sinking ship and get out before suffering through too much damage.

• When you hit an iceberg, investigate! — There’s a fine line between giving something up because it’s too hard and letting something go because it no longer serves you. It’s important to get the facts right when things go wrong. Use the ‘fly on the wall’ metaphor to keep your emotions out of the mix. What would a neutral observer make of your situation? What would their diagnosis be? Keep pushing or get out now? Be open to dissecting a crisis in this manner to get to the right answer sooner rather than later. It saves you a lot of heartache.
• Look at the big picture and remind yourself of the ultimate destination — From the example earlier about the stocks, traders fall prey to keeping their money locked up in bad investments because of false hopes. If they’d pause for a moment and consider their ultimate goal, that is to make more money, they would realise that the best thing to do would be to reinvest the money in better stocks. There is nothing wrong with losing some money while making money. It’s part of the process. The only thing that’s unreasonable is letting money lie in underperforming investments and using wishful thinking to generate returns. When the big picture is clear, the sunk costs won’t seem as oppressive or exorbitant anymore. The failures won’t sting as much and it’s easier to pick yourself back up again and keep moving forward.
• Ships are meant to move forward, backward and sideways, not sink downward — Sometimes the best way to deal with a sunk cost is to take a few steps back, rethink things and get back at it with a new angle. This doesn’t mean you’re giving up. Abandoning sinking ships does not mean you’re not seaworthy, it just means you need to find a better ship to sail in. You’re not giving up your dreams or goals. You’re just finding a more sensible way to get there. Instead of staying stuck in pathways that will lead to dead ends, you’re taking a new route. Embrace the fluidity of the journey. Taking two steps back to go three steps forward is much much better than standing still forever. Give yourself permission to try a new solution to an old problem.

Always remember, having a needle made of gold, doesn't mean you should poke your eye with it!

Likewise, just because you spent years building a ship, doesn't mean you shouldn't get off it when it starts to sink.

Keep your eyes open, stay afloat and be awesome!