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"Should I stay or should I go now?
If I go there will be trouble
And if I stay it will be double."
– The Clash
I've been part of an online community of entrepreneurs for the past few years. It's an informal group, the purpose of which is to share information, ideas and encouragement. This past Monday, on the invitation of Internet Maven Havi Brooks, I helped lead a teleclass for the group on "cutting your losses."
I don't mind telling you, I wasn't so sure at first what I brought to the party. Investment insights?… I'm your girl. But "cutting your losses?" That struck me as too far afield from the sweet spot of my expertise.
That is, until it dawned on me that all the years I've spent in the investment trenches have taught me quite a bit about knowing when to call it quits — much of which, interestingly enough, is diametrically opposed to our hard-wired nature:
- Humans are loss-averse. Countless studies (here's one example) have shown that even when the odds are identical, we are more conservative when the risks are framed in terms of losses than in terms of wins. Our brains don't want us to lose anything (even if it's a problem), and in our hearts, we are all hoarders.
- Humans need to be consistent. In order to develop a healthy sense of self and identity, not to mention maintain our sanity, we are driven to take action consistent with self-perception. That makes it especially hard to change course once we've committed ourselves.
- Humans don't like to admit mistakes. "Cutting our losses" means accepting that we were wrong, a realization that for many of us perfectionists can be painful. We'd rather maintain the fiction of a mistake-proof existence by keeping a bad decision on life support and refusing to let go.
- Western culture in particular – from The Little Engine That Could to Winston Churchill (e.g., "Never give in, never give in, never, never, never, never-in nothing, great or small, large or petty – never give in.") – equates quitters with losers.
