Tuesday, June 27, 2006

Book "Making great decisions in business and life"

I just got this book (by David R. Henderson and Charles L. Hooper) from the library, and am enjoying it thoroughly. It's full of illuminating little stories, and has given me some interesting insights about decision making and priorities. Probably the kind of insights that they charge their consulting clients big bucks to hear.

I do have a minor quibble with the authors, with their view on sunk costs. An example of a sunk cost would be (and this is one of the examples they use) a person starting a coin store in a small town. The store is losing money every day, but the storeowner says, "Well, I've already invested so much into it, I can't walk away now". In this case, assuming the storeowner really does know that a coin store is just not sustainable and he has no bright ideas for fixing things, it's a cut and dry case - he probably should call it a sunk cost, chalk it up to experience, and move on with his life.

But in most cases, it's not nearly so clearcut. The other example that the authors mention - you've reserved and paid for a camping spot, but there's a rainstorm - do you still go, or do you call the reservation fee a sunk cost, and do something else? If you go, you'll likely be uncomfortable, but the rain may stop, you may experience wonderful solidude because the rain has driven everyone away, or you may befriend some other fanatics who don't mind the rain. You may also have some insights about how people lived before modern conveniences protected us from all discomforts.

There's lots of potential positive outcomes. Plus, you have the satisfaction of knowing that you planned something, and then did it, weather be damned.

Good book, though. I particularly like chapter 7, Realize What's Important. I need to work on that some more.

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