Drowning Puppies
Hope for the best, plan for the worst
Why is it so hard to drown puppies?
These cute, cuddly and lovely little things.
We just love spending our time on them.
Imagining a future without them is hard, so so hard.
Although, you can relax now in case you got worried.
I’m not actually referring to real puppies.
I love these little guys!
Here is a photo of me and my dog.
He is a Yorkshire Terrier and has recently taken on an expanded role as Barketing Manager in my home office operation.
A dark metaphor
When I did my MBA, I took a class in innovation management and I still recall vividly the above metaphor being used: “drowning puppies”. It relates to the feelings of an entrepreneur or perhaps a corporate manager who is faced with the harrowing prospect of pulling the plug on their special project or venture.
As there is likely to be an emotional attachment and a personal history to the project in question, it might cloud our judgement and decision-making in such a situation.
Have you ever come across a project before and wondered why the heck are we working on that thing?
A few hypothetical examples:
Project X: The coolest tech with a massive budget, but no KPIs to be seen
Project Y: Weekly calls with the same external folks, no agendas or clear output
Project Z: A recurring event, but no one can remember why or how it came about
Can you think of any such projects, processes or events from your own experience?
On emotions and good decisions
Who doesn’t like a good motivational quote?
“Never stop”
“Never give up”
This might sound like a cool thing to say and to support, except for the fact that it’s a very generic statement with no business context or substance behind it.
Persistency is a personal strength, and so is listening to your feelings and emotions in business which can be used to your advantage in certain situations.
But can these skills work against us when faced with deciding on an underperforming project’s future and whether to pull the plug or not?
Maybe, maybe not.
There should always be room for emotions in decision-making, although it will be equally critical to keep a cool head and look at things objectively and factually.
What can we do to ensure this happens in practice?
Establishing investment rules
At this point, I’m going to make a comparison to the world of stock investments and trading, where there is something called a stop-loss.
A stop-loss is basically is a pre-set level for when your trading platform will automatically issue a selling order for a stock that you hold. For example, you might have bought 100 shares in company ABC123 for $100 each. You predict that your total investment of $10k is going to multiply and you’ll be able to cash in the double.
However, to protect yourself from downside risk, you decide to place a stop-loss order at $95. This means that if the market moves in the opposite direction that you think it will, your stock will attempt to sell at $95, so in theory you can only lose $5 per share on this trade, or $500 in total (a 5% net loss of capital).
Why do I use this example in a business/education blog?
Because it relates to the topic of emotional decision-making in a high-stress situation such as our business metaphor of “drowning puppies”.
💡 A pre-defined decisioning system removes the risk of making decisions on the fly.
Next, please do not fool yourself by compromising the safety net you’ve put in place (e.g. “Yeah I know I said I would stop the trade at -5%, but I have a feeling it will turn around. Let’s suspend that rule temporarily and let’s see what happens.”)
Or, another mind-trick is to “average down” your losses by adding to the position. For example, your stock has dropped to $90 and you are down -10%. Your average buying price is now 100+90=97.5. You now have twice the size of the investment and are down “only” 7.5%, but you have twice the capital at risk.
If you repeat this pattern and if the market keeps going against you, the financial pain will eventually become too much and it will likely result in a fire sale.
Now, let’s assume this didn’t relate to a $10k stock purchase, but a large business project with a $10 million investment behind it.
The numbers and the scenario might be different, but the emotional reasoning is similar and perhaps heightened because of the larger numbers.
Consider the below questions and reflect on how they relate to what we just covered:
How many business projects will have a clear ROI?
How many business projects receive additional funding, after the initial planned growth didn’t materialise?
How many business projects launch with a predefined exit-criteria for when the project will be terminated for good if the ROI targets won’t materialise?
I’ll let you hold onto these thoughts for now.
Perhaps it might be a good strategy to hope for the best, but plan for the worst.
Until next time,
Jens