An IT Lesson From Grandma: Don't Let Sunk Cost Get Out of Control

A fable that columnist Rob Enderle heard from his grandmother many years ago still resonates today. The message is simple--if you pour salt into a pot of tea, pour it out and start over--and it applies to many an IT investment.

By Rob Enderle
Fri, August 17, 2012

CIO — It is funny how some of the old stories come back to you. One stuck with me over the years—and it just saved me a ton of money.

Apparently this story is one of a number of fables my grandmother heard when she was growing up, and it couldn't be more pertinent today. It speaks to how we often make decisions and suggests that the better, cheaper path is the one we'll try to avoid like the plague because it requires us to first admit that we made a mistake.

Advice: Make Your IT Investment Decisions with the Right Information

I'll tell you the fable as best as I can remember it, apply it to a recent hobby project I was working on and conclude by bringing it back to IT.

The Fable: Fixing a Bad Pot of Tea

There once was a woman who made a pot of tea, but instead of putting sugar in it, she accidentally added salt. She was at a loss. She went to her next-door neighbor and asked for some help. Her neighbor said that pepper is the opposite of salt and might make the tea better. The woman tried that but wasn't a fan of the salty, peppery tea. So then went to another neighbor, who argued garlic was strong enough to overcome both flavors, but that made the tea even less tasty.

This went on for most of the day as the woman added more and more ingredients and her tea became less and less drinkable. She finally ended up at the home of the smartest woman in town. Upon hearing the story, this woman shook her head and advises, "Pour it out and start over." This fixed the problem.

My Own Experience: Building a Hot Rod

This summer I decided to revisit my youth. I bought an older Jaguar with the idea that I would turn it into a hot rod. After putting thousands of dollars into the project and looking at spending thousands more, I stopped and remembered my grandmother's story. I sold the car and started over with one that already had most of what I wanted. I not only saved thousands of dollars—I ended up with a better car.

Remember, You Can't Get Sunk Cost Back

The fable and my personal experience teach a concept we often forget to apply: sunk cost. Whether the initial decision to buy a technology is prudent or not, it will eventually become obsolete or cost more to maintain than it is worth, particularly when compared to something that is more capable. However, because we either are afraid to make it look like an early decision is a mistake or focus too much on patching a problem, we don't step back, take a breath and compare the costs and benefits of patching something instead of replacing it. We can go the other way, too, and recall the Dataquest surveys that followed the client/server wave, when the vast majority of customers moved prematurely and regretted their decisions.

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