In college, I took it upon myself to challenge my academics by taking the hardest math class offered to a freshman – Calculus. For my efforts, I failed the class and the effect it left on my GPA cause me to lose my scholarship for a whole year afterwards. If there is a lesson I learned from it, it is to know when it is in the best interest of everyone to abandon a pursuit or venture.
If I had admitted that I was over my head in the class, I could have drop out of the class in the first month without the hit to my grade point average or the failure grade in my records. While it is popular in our culture and movies that one should never quite or surrender, in real life you should always evaluate the cost benefit ratio involved in a task.
What does this mean? It means you should always keep emotions out of business decisions and evaluate an opportunity based purely on the facts and rewards. Too often we see small business owners pour money into a venture long after everyone else had realized that it was doom to fail. Why? Because the owners’ pride, ego, and self-worth are often on the line.
While it is exactly that strong moxy that drive individuals to pursuit entrepreneurial ventures. If blinded by it, it can also drag the individual into ruins both financially and personally. In psychology, there is a factor called “Vested interest”, meaning the efforts already committed to a task by the individual. Often, people would pour additional money and effort into a project that is doomed to fail due to the prior efforts they already spent on the project.
You can actually see this on display everyday in the marketplace. The perfect example would be Ebay auctions. If you ever participated in an Ebay auction, you know the excitement and competitive spirits it elicits in bidders. Occasionally if not often, you see people bidding over and above the market value for a product that can be purchase at a lower price in their local store. The reason why people do this is the “Vested interest” factor. Because they already expended their effort to participate and tried to win the auction. They didn’t want to lose the auction in the end because of the effort they put in. Even know logically, the person would be better off abandoning the auction and purchasing the product elsewhere. This is why investment companies never rely on “gut” instincts” but always rely on verifiable data to make their decisions. The same data is why they will never hold on to an investment out of sentimentality but sell it as soon as it fails to meet the preset investment criteria.
The two biggest resources we are all constrained by is time and money. So you should always ask yourself, is the task or venture at hand worth the effort you put into it? Or is your resources better spend elsewhere?
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