The Simplest Way to Become a Great Decision-Maker

Make decisions based on future value not sunk-cost.

The above image isn’t the house we rented. However, the home was built in castle style. It even had a drawbridge.


The lake house:

Last month we rented a small house on Seneca Lake. We had so much fun we decided to do it again this month. We found a beautiful home on a private lake. The drive was short. The price was right. It would be fun. It wasn’t.

I like to get away with my High School sweetheart. She drove. I played love songs on my iphone. Eric Clapton’s “You Look Wonderful Tonight” was followed by Joe Cocker croaking “You are so Beautiful.”

Things turned dark when we arrived.

The owners typically live in a private wing of their six bedroom home. We found out after making the reservation that the owners would be away. Yippie! Frankly, we aren’t the Bed and Breakfast type. We emphasize “away” in “Getting away”.

The house has two living rooms and six bedrooms. The owners were practically invisible. But it felt like mom and dad were in the other room.

Ignore sunk-cost:

We left early the next morning before taking showers.

Ignore sunk costs when making decisions. Past losses have nothing to do with the future value of available options. We could stay and be miserable or have fun at home.

It didn’t matter how much we paid. It felt great to arrive back at our country home. We listened  to Clapton and others on the return trip.

Make decisions based on future options, not past cost.

Dumb decisions:

  • Hanging on to employees that don’t fit and aren’t making progress because you’ve invested in them.
  • Staying in a miserable business relationship when better options are available.

Turn to the future. Past unrecoverable cost is irrelevant when making decisions.  

We’re glad to be home, even though we could be miserable at the lake.

What’s your sunk-cost story?

How might leaders overcome the tendency to make decisions based on sunk-cost?

Afterword: We’re just getting into AirBnB and learning to interpret the language. Originally, I hadn’t realized the owners were living in a wing of the home. That was my fault. When I learned they would be away, it was great. I had assumed that in the beginning. We’ve chalked this up to a learning experience.

If you have a lake house you rent, drop me a note, but only if you’re going to be gone.