Letting Go of “Sunk Costs”

Oh Irony, I love it when you rear your ugly face in my general direction.  You always know the right time to do so in order to ignite the maximum level of frustration in my little soul.  Around the same time when I started writing posts raving about my good fortune, my old friend Irony came swooping in from left field to knock me right in the middle of the head, both literally and metaphorically.  Upon arriving in the damp and cold capital of Colombia, Bogotá, I was greeted with some of those trivial irritations that lurk in the dormitories of hostels as well as a new wrinkle in an old plan of mine.

After unleashing all of the gripes that I was certain were caused by the city of Bogotá itself, I went outside for a cool-down walk and thought about an old behavioral finance conundrum from my former profession – finance managers being misguided by sunk costs.  This basically boils down to a situation where a current project was previously assessed to provide positive value for the firm, but sometime after the initial investment phase the project becomes not profitable and the finance manager continues to back the project because of an irrational mentality to not “waste” that initial investment.  This comprises the sunk costs.  Likewise, I found myself in a situation where this concept was applicable.  I had made an initial investment to do a hotel management program in Spain for four months, but now the situation has changed and as such, this venture is no longer a positive one for me.

Que pasó?

It was around Month 3 of my travels when I decided that traveling and blogging needed to be my new career and my new goals for this journey included figuring out a way to make this a sustainable way of living (read: make money on the road).  To this end, I started researching work abroad programs and came across one for working in a hotel in Spain for any period from 1 to 12 months.  This sounded like a perfect opportunity for me to improve my Spanish and learn a bit about the hospitality industry.  I had figured that working in hotels would be a logical move if I wanted to support myself traveling.

I sent in a general request for information to the website and got in touch with a coordinator who from the start had been very evasive in his answers to my questions.  At the beginning, I was a bit annoyed with his arrogant and defensive attitude but decided to proceed anyway with the application because the program appeared to be sound and it seemed like they more or less had their act together.  I started the process over a month ago and recently wrote an e-mail to the coordinator asking for an update on my application.  Mainly, I wanted to know if he had secured a placement for me and what I would be doing at this hotel.  He responded very quickly actually, but sent me a website to a random hotel and asked me what I thought.  I thought this was a bit odd, that after weeks of no contact, he all of a sudden just had this website ready and waiting to send to me.  I let this sink in and the next day I decided to unleash some mild frustration about the fact that I feel like he’s done absolutely no work and I didn’t like the fact that there is no confirmation or anything official from the hotel itself.  He, being a very arrogant and stubborn man, did not take kindly to my light criticism of how he was doing his job and what resulted was a chain of the most obnoxious e-mails I’ve sent in the past five years.

I came to the conclusion that this so called coordinator was either really lazy and/or this program was a complete sham.  He lied about sending me information about the position, was annoyed that I wanted him to give me more information, and I could tell he had no contact whatsoever with this hotel that he was shilling off to me.  I was infuriated by the end and at a loss for how to proceed.  I really wanted to do this program, but I was now concerned about how it would go now that I’ve fostered this animosity with the coordinator because I had the audacity to ask him where I would be working for four months before sending in the rest of my payment for his placement services.  What can I say?  I must be high maintenance.

On my cool-down walk, I thought perhaps I should try to salvage this relationship because I had already paid an application fee and if I didn’t do this, I’d be at a loss for finding an alternative program wherein I could also save money for a few months.  This is when the fallacy of making a decision based on sunk costs hit me and I realized I had to pull the plug on this venture of mine.  I really had no confidence that this would be a good or even a legitimate position for me anymore – securing the visa for this program also included lying to the Spanish Embassy, something the coordinator actually told me to do.  As for the application fee I already paid, I just rationalized that I would have to accept it as a mistake, a sunk cost and pull the plug anyway on this now negative NPV project.

Lessons Learned

After coming back to the hostel, it was time to assess my current situation and determine how bailing out on this venture in Spain would affect any future plans.  My initial assessment was bleak and I was extremely frustrated at the thought of going back to the drawing board and figuring out what to do with myself for the next year while I plan for the Mongol Rally, not to mention the fact that I’ve could have spent more time in South America knowing this.  I’ve been getting better at turning bleak situations around though and quickly turned to writing about the situation as a lesson for myself and for others who experience a plan falling through while on the road.

Lesson #1: Always trust your instincts – I’ve said this before in regards to relationships.  After analyzing some of my past relationships, the thing I noticed with all of the negative ones is that I always had a gut feeling that I shouldn’t start anything with each particular guy.  In hindsight, I always said, “I knew this was a bad idea, but I didn’t listen to my gut.”  I think I’m old enough and have experienced enough now to feel confident that my subconscious is in tune with what’s happening around me.  I need to trust and rely on my instincts more in these kinds of situations and this one with the placement program was no different.  I felt the coordinator was being a bit evasive from the start and wasn’t sure if he was trustworthy.

Lesson #2: Accept that plans can fall through – I avoided spiraling myself into a great big frenzy of scrambling to try and “figure out” what I was going to do with my life by going for a cool-down walk when I noticed myself getting extremely frustrated.  It’s natural to feel disappointed when a seemingly good plan falls through, but it often will happen because that’s life.  No matter what you do, where you live, or where you work, a good plan is always bound to fall through.  Accept, assess the situation and come up with a new one.  It helps to keep your eyes open so that you’ll see that next door when it opens.

Lesson #3: Keep your eyes open for the opportunities a failed plan opens up – I can’t stress this enough!  When a plan falls through or another ton of bricks comes crashing down on your world, the best way to cope with disappointment is keeping your eyes opened and looking at the possible opportunities that are opened up to you.  I remember five years ago being in a relationship with a man who I was certain I would marry and with whom I’d settle down for a lifetime of happily ever after.  This fantasy came screeching to a halt after one disastrous month and I was left broken-hearted in Baltimore.  I was as crushed as one would expect and wasted precious moments hoping he would change his mind and feeling sorry for myself.  The same week that this happened though, my boss told me that the office start-up in Amsterdam was definitely a go, and the company wanted me to move to Europe.  This was always something I wanted to do but as of late, my head was on the wife and mother track.  Now, feeling in a state of ‘Nothing to Lose’ I immediately accepted the offer and the travel beast lurking deep inside of me was reawakened.  This one week set off a chain of events that led to the happiest moments of my life and led me to where I am right now and if you’re a regular here, you know I’m happy in this life.  I hate admitting it but I can’t honestly say that if I hadn’t been dumped, I would have accepted the offer.  All of this said, I think it’s so important to always be on the lookout for the opportunities presented by a negative impact situation.

Lesson #4: Focus on the positive – This goes hand-in-hand with Lesson #3, but I think this one refers more to proactively making lists of all the positive things that are currently happening as a result of the negative thing.  This is my list of all the positive things this failed hotel program presents:

  • Spending time with my nieces (birthdays, holidays, soccer games, etc.)
  • Being around for my best friend’s baby shower and birth
  • More opportunities to explore my own backyard
  • Dropping off a lot of things I realized I didn’t need
  • Having time to work on my new projects (Mongol Rally, Project BBB – to be explained at a later time)
  • Earning some extra money to keep me traveling a little longer

    New Path, New Paradise, New Life

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6 thoughts on “Letting Go of “Sunk Costs”

  1. I love your positive approach to this disappointment. Your lessons are valuable to everyone and thanks for sharing that insight. Sometimes we forget that as we journey through life there will be many experiences that come unexpected. We dance in the joy of spontaneous unplanned events, but tend to dwell on what fell through. When in the end we grow from both experiences.

  2. Pingback: My Love/Hate Relationship With Bogotá « Globally Misguided

  3. Pingback: Some Travel Lessons: Trusting Yourself and the Universe « Globally Misguided

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