00:00:11:21 - 00:00:23:13 Unknown Hey, everybody, welcome back to the Your Project Shepherd podcast. I'm your host, Curtis Lawson, and our guest today is no. One. I've had guests on every episode that I've ever done. 00:00:23:15 - 00:00:44:22 Unknown But I've decided to mix in a few episodes solo so that you can maybe hear a little about, what's important to me and what's on my mind. And here lately, I've, I've been kind of the situation. So that's been kind of at the forefront of my thought. And that is a, a term that you may have heard of called is the sunk cost fallacy. 00:00:45:00 - 00:01:04:22 Unknown Sunk cost fallacy is design is, defined by, Oxford Dictionary as a phenomenon whereby a person is or is reluctant to abandon a strategy or a course of action because they've already invested heavily in it. Even when it's clear that that abandonment would be more beneficial to them. You know, I think we've all done this right. 00:01:04:22 - 00:01:29:06 Unknown Like we've been watching a movie for half an hour and we realize, man, this movie really sucks. But we're just going to stick it out because we've already invested half an hour in it. Let's just go ahead and finish the movie. Right? And people do this all the time with relationships. Jobs. Maybe it's not fulfilling anymore or it's an abusive situation, but they're like, man, I've been in this for 15 years and I'm just going to stick it out. 00:01:29:07 - 00:01:54:06 Unknown So, trust me, this happens all the time with construction projects, too. And in my consulting business, I've had several of these pop up over the last few years. And the story is almost always kind of start off the same way. People hire pretty much always the kind of a low bid builder, because, you know, he's way, way cheaper than everyone else. 00:01:54:08 - 00:02:15:20 Unknown He told them what they wanted to hear. He can get this job done for this price. And then, shockingly, the guy can't execute what he promised. I've. I've related the story on a few episodes in the past, but I had one where a builder was on a project for, I think, about two years. And then the house wasn't even through framing at that point. 00:02:15:22 - 00:02:33:12 Unknown And when they first hired me as a consultant, I walked in, I looked at it, and, you know, the framing was even good. And I said, you should fire this guy. And the response was, well, I doubt we can find somebody else to do this cheap. And he's a really nice guy. And he promised us that he can do it. 00:02:33:12 - 00:02:57:04 Unknown So we're just going to stick it out. Well, so they stuck it out. And guess what? Like, a year later, a few hundred thousand more dollars down the hole, and the guy still can't get it done. So another case, almost. Almost the same situation. The guy grossly underbid the house. And this time, it's a very, very complex, modern house. 00:02:57:06 - 00:03:18:00 Unknown In fact, I think I've told this story before on the podcast as well. Again, after over a year framing, framing is not even through. It's obvious that he doesn't have, you know, the trades capable. He doesn't have the framer that knows what he's doing. He personally has never done a house like this, so he doesn't even have the the knowledge to keep an eye on the framer. 00:03:18:02 - 00:03:39:16 Unknown And so there's no world in which any amount of money is going to build that house with those trades, with that builder. But, unfortunately, that situation, they just stuck with the guy. The guy was was a pretty smooth talker, and somehow he could somehow he convinced them that he could build this house. They also convinced him that I was wrong. 00:03:39:18 - 00:04:01:00 Unknown So they ended up firing me on the project, as a consultant. And they let the builder keep working. So, here a few weeks ago, I actually drove by that house. And guess what? Three years later, three years into it, rather, the house is still not even three fourths complete, and it looks like total crap. 00:04:01:02 - 00:04:22:09 Unknown And, I don't know that it's ever going to look good. So, once again, they have this mentality of, you know, we've given this guy so much money. We think that he can do it. It's, you know, it's too hard to find somebody else to finish it. So we're just going to ride it out. And I think that also sometimes people just don't want to admit that they made a mistake. 00:04:22:10 - 00:04:42:12 Unknown They they really, really want to believe that there's some world in which there's a guy that can actually deliver what they want. You know, for a fraction of the cost of everyone else. I think, you know, we see this all the time with, you know, even buying a car like you, we think, you know, we think that we can get that car cheaper from someone else. 00:04:42:14 - 00:05:03:18 Unknown And then by the time they add on all the extra fees and add ons, guess what? It's the same price the other dealer was charging. But, you know, with with homes, people have invested so much money and they've sunk so many hundreds of thousands or maybe millions of dollars into it. That, they really feel like they have to just hang on to that. 00:05:03:20 - 00:05:24:13 Unknown And so they hang on so tightly that they just end up writing that ship all the way to the bottom. It's really sad. And it's not like these are dumb people either. So the first house that I mentioned, the guy is a petroleum engineer and his wife's a teacher. The second couple. The wife's an attorney, and the guy owns a very large, very successful business. 00:05:24:15 - 00:05:46:07 Unknown And I've got another story. Actually, one the crafted ended up, finishing the house. Almost exact same situation. The guy's a college administrator, and the wife is a is a doctor. So it's not like these are dumb, uneducated people making these decisions. It's just they they believe that they made the right decision to begin with. 00:05:46:08 - 00:06:09:10 Unknown Once it was proved to them that they made a wrong decision. They just have a hard time, you know, either believing that in owning up to it or they just they're like, God, I've sunk this much money into it. I just have to write it out. So, I don't know, it's it's just heartbreaking to watch. Especially when you're watching people throw away, you know, millions of dollars into a project. 00:06:09:12 - 00:06:32:08 Unknown But I guess at least most of those people have the means to to recoup that money. Whereas I've seen other cases with, you know, like smaller houses, remodel type projects where maybe people have sunk $100,000 into a remodel and that's like all the money they have. It's all their savings. So that means a lot more to them, maybe, than the the people who dropped a couple million. 00:06:32:08 - 00:06:51:23 Unknown But they're but they're doing really well in life. A lot of these people don't have the money to get an attorney involved. They don't have the money to hire a consultant to kind of back them up on this. You know, so that's even more of a sad situation. So aside from just construction, issues like this with with sunk cost fallacy. 00:06:52:01 - 00:07:15:07 Unknown The other way that this plays out in my world is with, work relationship tips. Like when it comes to, employees or sub subcontractor relationships, you know, I am absolutely guilty of this. Maybe more than anybody else. And I'm sure my staff would, smile and, back me up on this. You know, when it comes to employees, I hate firing people. 00:07:15:09 - 00:07:42:12 Unknown I don't know anybody that there really enjoys it, but, for me, it's just causes anxiety. And although I'm getting better at it after 25 years, it still hurts me every time to have to fire somebody. You know, I think that, I heard this phrase a few years back in a peer group that I was in, and it's the phrase was that hiring is guessing and firing is knowing. 00:07:42:14 - 00:07:56:03 Unknown I think it's often an ego thing that you know, people don't want to admit. I don't like to admit that I screwed up, that I hired the wrong person. And it feels like you're kind of admitting that you made a mistake. You're admitting that you made a bad hire. When you fire somebody or let somebody go, you know? 00:07:56:05 - 00:08:19:09 Unknown Same thing with with letting a builder go. You're basically admitting that you that you made a mistake by hiring that person. But yeah, it's it's really it's really painful. As a business owner, but when that situation comes up and having to to fire that person and basically admit that I was wrong, but, you know, there's only so much information that you can get during a job interview. 00:08:19:11 - 00:08:37:06 Unknown You know, even if you check backgrounds, references, all that kind of stuff, it's it's really easy to fake those things. So even somebody who's experienced in staffing issues is really just making an educated guess at knowing if that person is going to work out, or if that person is able to kind of fit within their systems at their company. 00:08:37:08 - 00:08:56:17 Unknown It's kind of the same thing with subcontractors. You know, we, shop for subcontractors on a regular basis. We try to vet them. They might be driving a nice company truck and have a nice business card. Kind of a good reference list. Of course, no one's going to get is going to give you a bad reference list, right? 00:08:56:19 - 00:09:24:15 Unknown But until you've actually done business with these people, you just don't know. And so back to sunk cost related to this, I've seen builders do this. And again, I know I've done it too. You know, you're like, well, you know, I've used Joe for five years to do this for me. And even though he's been screwing up, I just have a lot of time invested in him working with us and teaching him our systems and maybe my project managers think he's a nice guy, and he's just can be so hard to find. 00:09:24:15 - 00:09:53:01 Unknown Another whatever plumber electrician drywall guy is going to be. It's just going to hard to find another guy to replace Joe. You know, and so before you know it, you've talked yourself into keeping Joe around, even though you know he's really not capable. Executing the kind of work that you need or he's just not capable of kind of working within your systems and the way your company operates and you find yourself, you know, making excuses for him or, you know, kind of working around his deficiencies. 00:09:53:03 - 00:10:14:17 Unknown So, in fact, that's a whole, a whole nother episode that, I'm going to do. And that's builders, having the trades who are capable of executing the kinds of projects that they, they need to have, you know, on their team. So anyway, we're going to keep this one short. All these little solo episodes I've had ideas for, we're going to keep short. 00:10:14:17 - 00:10:35:03 Unknown But as these things come to my mind, like the sunk cost fallacy, I just want to sit down here in the studio and do the recording. So I think I've kind of rambled on about the sunk cost fallacy enough. Hopefully that you hopefully you got something out of it. If you have a suggestion for something that you like for me to, to riff on a little bit, I would love to do it. 00:10:35:03 - 00:10:58:20 Unknown So send us an email. You can drop us a DM on, you know, Instagram, LinkedIn, Facebook, wherever you saw this or on our YouTube channel, or send us an email at podcast to your project shepherd.com. I'd love to connect with you and talk to you about some ideas for episodes. So that's it for today. I appreciate you joining me, and I hope you come back and, check out next week's episode. 00:10:59:01 - 00:11:02:11 Unknown Take care.