The Kobayashi Maru and the Sunk Costs of Love

Bloggified by Jake on Saturday, July 10, 2010

Economics classes teach the concept of sunk costs early and will continue hammering on them all the way through MBA courses and doctoral theses, businesses regularly suffer from their inability to accept the idea. Yet, it's not that difficult to understand why. Our brains just don't seem wired for it.

For those who don't recall seventh grade social studies and beyond, sunk costs are the money you spend on a failed enterprise that you cannot ever get back if you admit your failure. If you spend a million dollars to open a factory and have to shut it down the next day, you could sell the machinery inside, sell the property where it stands, sell the building, sell the office furniture, and recoup at least some of that million. If you managed to sell everything for $800,000, you sank $200,000 into the factory and there is no way you will ever see it again.

Often, when we see this presented, our instinct is to focus on the sunk costs as unacceptable. If the factory stays open, it could generate revenue. Eventually, it can make enough to cover the $200,000--or so we choose to believe. The more likely case is that keeping the factory open will cost more money than it generates, and six months later, the machinery and furniture is used and worth less, real estate is down, and you've had to pay half a year's wages to all the workers. Instead of being down $200,000, you're down $400,000.

Simply put, the concept is not to throw good money after bad. Even if you've spent more than the gross national product of some nations into research and development, product testing, and advertising, there comes a time when you have to admit the world just might not ever want baby food for adults, celery-flavored Jell-O, or Pepsi that tastes not quite like Pepsi and looks like seltzer, no matter how many millions you paid Van Halen to tell them otherwise.

And yet, what would be millions in sunk costs often becomes tens or hundreds of millions because the people in charge refuse to recognize the failure for what it is.

Human beings appear to be wired for hope. When our favorite baseball player gets three hits in the entire month of June, he's not too old nor has he lost his edge. He's in a slump and will snap out of it any time now! Pessimists are derided for not thinking positively... and too often realists are labeled as pessimists for simply acknowledging the possibility of failure instead of assuming everything will go swimmingly.

Furthermore, everyone loves a story about a guy who succeeds against all odds. Every good entrepreneurial story begins with "No one else believed..." or "Everyone told him he was crazy when..." When everyone else said, "Why would you want to put an outhouse inside your home?", Thomas Crapper never stopped believing! Where would the world be if Ken Hakuta had listened to all the nay-sayers who told him people didn't want anything wacky to walk on their walls?

These stories alway imply that failure is simply a matter of not wanting it enough. When the Yankees win the World Series, it's not because they buy all the best players in baseball and pay them more salary than the combined rosters of the Padres, Pirates, Rangers, Marlins, and A's. It's because Derek Jeter is such a great leader and Alex Rodriguez finally overcame the stress of playoff baseball and Joe Girardi understands his team so well.

You don't have abs so great they'll get you cast in a teenage vampire movie despite a complete inability to act because you're a quitter. You could have a yacht and a couple mansions and girls in bikinis who hang out sipping champagne around your pool all day if only you had the go-get-'em spirit that those guys on the infomercials at 3AM do. Whatever dreams you've had but never achieved are solely the result of your lack of faith.

The point is that we are taught never to accept failure and to expect success. This is why we've become a nation in perpetual debt to our credit cards. If we want a new 50-inch high definition TV, we buy it, because, even though we don't have the money now, it's only a matter of time before we'll be more successful than we currently are and able to afford it. Hell, the Republican Party's entire economic platform is based on the idea that everyone who wants to be successful will be and we shouldn't help anyone who is unsuccessful because they are clearly only unsuccessful because they are lazy.

Star Trek fans will understand where I am going with all this.
The Kobayashi Maru was a test given to all Starfleet Academy cadets, but that none could pass. The point was to put them in a no-win scenario to see how they would deal with failure. Of course, as fans, we get all lightheaded when we hear that Captain Kirk managed to beat the test because he "doesn't believe in the no-win scenario." But when you consider the above discussion of banking on unlikely circumstances and the compounding of failure when it isn't acknowledged, Kirk becomes a petulant, immature, delusional brat who is no better than Scottie Pippen refusing to inbound the ball to Toni Kukoc.

For the past nine years, I've been in a failing relationship with the mother of my children. We never got married, solely because we never liked each other enough to do so. When she first learned she was pregnant, her family immediately assumed I would walk out on her, and treated me as such an asshole for seven to eight of the last nine years. I, on the other hand, swore I would never leave my child and that I would do whatever it took to make the relationship work. That refusal to accept that the relationship was a failure led to longstanding misery.

They say, "It doesn't matter how many times you get knocked down. What matters is how many times you get up." Admirable as that sounds, there does come a point where you are best off staying down.
A year and a half ago, I moved out after years of planning and threatening to do so. Every previous time, however, we'd agree to try to make things work out for the good of the family. Even when I moved out, it was treated as a temporary arrangement--a cooling off period so the two of us could refind our bearings, recognize what it would take to make the relationship work, and decide if those were things we were willing to do.

In short, we refused to let the relationship and our family fail. We focused on the sunk costs of nearly a decade together, a house purchased together, shared expenses, and more, and held onto the hope that eventually we'd start to love one another enough to erase all the bad memories and misery. I convinced myself that if I was the best boyfriend in the world--the shoulder-and-foot-rubbing-est, always-telling-her-she-looks-beautiful-est, spending-more-quality-time-with-the-kids-than-any-other-dad-est, multiple-orgasm-giving-est boyfriend that Cosmopolitan seems to think all women want--that she would recognize what she stood to lose and meet me somewhere in the middle.

Instead, she never let go of her simple dislike of me. No matter what I did from Day Two onward, she had made up her mind on Day One that she didn't like me and wasn't going to do anything to make us work as a couple.

It is possible to do everything right and still fail. It's even more likely to do several things right but still do enough wrong to fail. I did so much right that even as I type this, I have trouble accepting that my family isn't a family anymore. I feel guilty when I flirt, but have to remind myself I can't cheat if I have no one to cheat on. I failed, and with every failure I tried to learn, to improve, to change tactics, and proceeded to fail again.

I refused to believe in the no-win scenario.

And like Captain Kirk, I failed to learn how to fail. Now, when i can deny it no longer, I can't help but be devastated, unable to cope, worried that success is forever unachievable.

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