Learning to play poker 😁😬😨🃏
One of my buddies and I were learning to play poker at the same time. Let's call him John.
John thought he had a decent hand, and raised. Some people called his raise. The pot got bigger. Another card was dealt.
😏
John raised again, they called. The pot got bigger still, and another card was dealt again.
😬
Of course, those later cards didn't quite go John's way. And now his hand isn't looking as good.
😨
And now someone else raises. So John could fold and save the rest of his money for a later hand. Or he could call their raise and go all in.
The problem is that maybe 80% of his chips are in the pot. So he can fold and keep the extra 20%, but it'll be a very uphill battle from there. Or he can just take the chance that maybe he'll get lucky.
This is called being pot-committed.
Where because of the size of the pot, you pretty much have to stay in the game. You're committed to your course of action.
A lot of us feel that way in life. We've spent so long getting good at what we do, that even if we're not happy we feel like we're committed. We can't start over.
😞
Contrast that with sunk costs. A sunk cost is money that you've spent and that you're never going to get back. You can't let a sunk cost factor into your decision making, because it can cause you to throw good money after bad.
Time is the ultimate sunk cost. Once it's spent, you're never getting it back.
For most of us, we think we're pot committed in our lives, but we're confused. That time isn't in a pot that we may win. That time is gone. That time is a sunk cost. So you've spent 10 years in a career and you're 32 years old. Are you stuck in your career until you retire (another 25 years?)?
Or are you likely to work for another 50 years? In which case, you could have 3 or 4 careers in that time.
And John? Well, he went all in, hoping to get lucky. He didn't, and he was cleaned out.
PS. The only extra thing to add is that time is interesting because, even when we spend it poorly, there's usually something we get out of it. We learn something. We meet someone. We become the person we are today.
PPS. I only lasted a few hands longer than John. Maybe there's another lesson in here - that we shouldn't be down on ourselves when it takes us a while to learn something new. Another reason not to be too hard on yourself for decisions made 10 years ago.
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