Posts Tagged ‘concrete costs’

The Upside of Quitting

July 27, 2016

The title of this post is identical to a chapter in “Think Like a Freak” by Steven D. Levitt & Stephen J. Dubnar.  Given the many posts that this blog has devoted to “GRIT,” it is obligatory to pay some time to the benefits of quitting.  The posts on “GRIT” did offer some cautions on choosing passions, on compromising on passion, and of indicating the plausibility of searching out new passions.

The “Think Like a Freak” authors offer three biases against quitting.  The first is a lifetime of being told that quitting is a sign of failure.  The second is the notion of sunk costs.  It is tempting to believe that once we’ve invested time, money, and sweat equity into a project, it seems counterproductive to quit.  However, continuing this activity can result in additional costs without any guarantee of success.  Perhaps the best example of the sunk cost fallacy is the War in Viet Nam.  However, noble the original motivation, more and more resources were put into it, and lives lost without a good result.  In the end, no victory was achieved.  Losses and lives could have been saved the earlier the United States withdrew from Viet Nam.

The third force that keeps us from quitting is a tendency to focus on concrete costs and pay too little attention to opportunity costs.   For every moment and dollar spent on the effort could have been better spent on a an effort with more potential.  The authors note that for every ten Freakonomics research projects they take up, roughy nine are abandoned within a month.  Although they do not say so, it is possible that had they not abandoned these projects it is unlikely that they would have enough successful material to fill three books.

The authors do offer a methodology to help decide if quitting is appropriate.  It is called a “premortem” by the psychologist Gary Klein.  It is common for institutions to conduct a postmortem on failed projects, with they hope that they can learn exactly what killed the project.  This risk can be mitigated can be avoided by doing a premortem as a preventive measure.  This involves thinking of all the factors that could lead to failure of the effort.  Then assess the likelihood of these factors occurring, as well as how these factors are dependent on each other.  That is what needs to occur before other factors can succeed?  This task involves subjective probabilities.  One can do both optimistic and pessimistic projections.  It is your overall subjective assessment as to whether to proceed.  This procedure does not guarantee success, but it should be helpful in identifying points of failure and provide some estimate regarding the likelihood of success.

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