The High Cost of Inaction
Opportunity cost is an economic term. It refers to the value of the next best alternative when a decision is made to allocate resources. It involves alternatives like time, money, or effort. All that is in relation to a particular choice. It represents the potential benefits or returns that could have been gained from choosing an alternative option. The opportunity cost reflects the trade-offs involved in decision-making. It highlights what is sacrificed when one option is chosen over another. Understanding opportunity cost is crucial in making informed choices. Especially when resources are limited. And decisions involve competing alternatives. And then there is my favorite drunken Irish writer, George Bernard Shaw. He wrote, "If all the economists were laid end to end, they'd never reach a conclusion."
John Kenneth Galbraith, Ken to his friends, was a Canadian American economist. He was also a diplomat, public official, and intellectual. His books on economic topics were bestsellers from the 1950s through the 2000s. As an economist, Galbraith was a long-time faculty member at Harvard University. He taught economics at Harvard for half a century. Above all, he was a writer. He wrote almost fifty books. These included such works as American Capitalism in 1952, The Affluent Society in 1958, and The New Industrial State in 1967. He said about his own profession, “The only function of economic forecasting is to make astrology look respectable."
The high cost of inaction is about our potential negative consequences that come as a result of a choice. When we choose not to take a particular course of action, what happens as a result? It is the paralyzing point for those who can’t or won’t make a clear decision. Whether in business, or our personal choices, there are times when failing to act leads to missed opportunities. It can cost us in the financial arena. Or it could make the current problem even worse. The concept emphasizes that inaction itself can have overlooked costs. There are two choices in decision-making. We should consider not only the risks associated with taking any action. But also, the risks of not taking action when assessing potential outcomes. As Pablo Picasso put it, "The cost of inaction is greater than the cost of making a mistake."
Dale Carnegie is required reading for salespeople. One of his most famous quips reads like this, "Inaction breeds doubt and fear. Action breeds confidence and courage. If you want to conquer fear, do not sit home and think about it. Go out and get busy." In sales, where time is often as significant as opportunity, inaction brings more risk. The biggest risk is missed opportunity. Count how many times our self-imposed delay cost us more opportunity than caution prevented us from risking. How many times did taking the safe route keep us from the road less traveled? And then someone else realized the opportunity? I am not suggesting throw all caution to the wind. What I am suggesting is to learn to get comfortable with calculated risk. As the old saying goes, "Nothing ventured equals nothing gained."
One of the worst outcomes of caution is stagnation. When we taste a little bit of success, we often forget the path that brought us to this point. We become conservative in our thinking, and this leads to stagnation. In our early days, we took chances, took risks and that is what got us to where we are. Our success leads to amnesia about how we made it to this point. It wasn’t by analyzing every angle to make sure we made the perfect move. It was by putting ourselves in motion and charging forward to the finish line. Sure, we made mistakes along the way, but the key to success is not repeating the same mistakes. And that is why we get conservative. But the knowledge gained through experience should be the guardrails to help our next journey.
This conservative thinking boxes us in. We stop thinking about progress and start thinking about maintaining what we have. This is a prelude to extinction. As Michelangelo wrote, "The greatest danger for most of us is not that our aim is too high and we miss it, but that it is too low, and we reach it." Think of what that costs us in the long run. How many times have you worked on a proposal for a customer only to look at the end total and say to yourself or out loud, “Whoa, they will never buy this or never be able to afford this.” I can tell you I have done this until I learned to not do it anymore. I had a customer take pity on me one early morning. It was an auto dealer. I had been trying to get him to see me for weeks. Finally, I caught him in his office at 7:15 am. (Yes, you can make sales calls before or after work hours.) He gave me some great advice. At the time I was trying to get him to buy my two-thousand-dollar sales promotion. He said, “Son, you are not even on my radar. I spend ten times this on coffee for my waiting room, each month. If you want to get in the ball game, you have to speak on my level.” Talk about an eye-opener.
There I learned about the opportunity cost of thinking too small. And I never did it again. From there, I never presented anything less than my best offer. And because of that, I enter the conversation at a much higher level. I don’t leave money on the table. I set the value proposition and the conversation about me and my product at a higher position on the food chain of offerings. I will let someone else be the low-priced or cheap person in the market. My future is dependent on creating and maintaining a high value. Let the other guy or girl be the low-priced leader. There might be short-term life in that position but there is no longevity. Want to know who is the low-priced seller in your market? Here is a hint, if you can’t find that person in your market, it is you. As Yoda said, in The Empire Strikes Back, “Once you start down the dark path, forever will it dominate your destiny.”
Failure to act will damage your reputation. You want to be known as a market leader, somewhere people can turn to solve problems. That doesn’t happen if you don’t act. Most problems are time sensitive. Look at the best available information at the time and make the best decision you can make. If you work for me, I will never come down on anyone making a decision based on the best information available. It is up to me or other managers to give you enough information to make a decision. If we do not do that, that is a management failure, not an employee shortcoming. Now, if you have all the latest intel and choose unwisely, especially when you know better, that is on you. And we will have a very different conversation.
When we wait, especially in a time-based business-like broadcasting, we put ourselves at a strategic disadvantage. In our world, it is usually ‘first in gets the win.’ Everyone else is playing follow the leader. Act. Make a choice. Back your choice with the resources to make it successful. I have never been a fan of the ‘soft launch.” As long as I can remember, I have not seen one be a success. It tells the marketplace, we are not ready, so here is a half-baked version of what we are planning. Quaker Oats would never put half a box of cereal on the shelf. And then say to consumers, “If you like it, next time we will give you the whole box, but not until that point.” Broadcasters are notorious for soft launching new programs, new products, and new brands. And most fail to get traction. Then we are on to the next new product, with the same half-baked launch strategy.
Eckhart von Hochheim was known as Meister Eckhart. He was a German-born Catholic theologian, philosopher, and mystic. He lived in a time when there was increased tension in the hierarchy of the Catholic Church’s dominant factions. So much so that he was tried for heresy during the Inquisition around the year 1329. Why is he important now? He wrote, before his death, "The cost of inaction is far greater than the cost of making a mistake." And so, reinforces the point that inaction costs less than acting. And cost far less than making a mistake. But some are risk averse. They would rather live in the conservative trappings of no-risk than forge a path of their own with all the associated risks. I get that. But then maybe selling is not your calling. Successful sellers take calculated risks. And learn from them along the way. They provide the road map for more risk-taking ventures in the future.
There are some reasons for caution and aversion to risk. Some fear making mistakes to the point that there will be many revisions and that is extra work. And extra work means extra cost. But we live in a world where our prospects are cutting their number of vendors. It was seven or eight twenty years ago. It is a mere two or three now. The first to the party often wins the race. If nothing else, it sets the bar for everyone else. Don’t you want to be that person? But if you are that person, don’t settle for the middle of the road. Come with your best offer and make that stand up as your value proposition for the long term. The value of the first contract is what they will think of you for the life of your relationship. Shouldn’t that value be high?
Even the Oracle of Omaha, Warren Buffet, ascribes to this theory. He says, "The cost of doing nothing is ten times higher than the cost of making a mistake." And he knows about mistakes. When it comes to money and investments, he says there are three big ones you can avoid. They are, “Buying at the wrong price. Confusing revenue growth with a successful business. And investing in a company without a sustainable advantage.” Do you think he invented that wisdom? No, he made all three of those mistakes before he learned not to do them again. He bought a business without a sustainable advantage. In 1993, he chose Dexter. It was a shoe company. About it, he said, “To date, Dexter is the worst deal that I’ve made. But I’ll make more mistakes in the future, you can bet on that.” And that is where he learned lesson number three. Yet, he still took action. And didn’t let one misstep dissuade his future actions. He used that lesson as a guardrail to guide the future.
Seth Godin is another who believes in action rather than inaction. He says, "The only thing worse than starting something and failing is not starting something." The opportunities lost by not acting add up. I am sure others would say it is better to not dump time and resources into a risky project, but we didn’t put a man on the moon without taking some risks. Life is risk. The question is how much risk are you comfortable with? I will argue that the answer to that question is proportional to your age. When we are young, we consider ourselves invincible. As we age, and get more responsibility, we become more and more risk averse. We don’t want to have to recover from disaster. But taking risks and acting on instincts is a muscle memory activity. If you are doing it all the time, you don’t have to remember the right and wrong way to put yourself in motion. When we get conservative and comfortable, it becomes harder and harder to create the action. And remember the actions that made us successful in the first place.
Elbert Green Hubbard was an American writer. He was a publisher, an artist, and a part-time philosopher. He was born and raised in Hudson, Illinois. What made him successful? It was his early days a traveling salesman from the Larkin Soap Company. He wrote, "The world is moving so fast now that the man who says it can't be done is generally interrupted by someone doing it." And he wrote that around the turn of the twentieth century. It was before the first radio transmission. It was before the first Television broadcast. And before Al Gore invented the internet. Imagine what the speed will do for us now. And imagine what we are leaving on the table when we don’t act on our ideas.
Show your customers this same value proposition. When you make an offer to them, let them know the cost of the investment. But also show them the cost of not acting on the offer. Let them know the money they are leaving on the table, by not getting started. Find out what the gross margin of profit is for one sale at that company. Multiply that by a mere one-half of one percent of your audience. They are going to be spending money on this service this week, this month, or this year. That value is the opportunity cost of your offer. And you need to put it on the table so your customer can make the most informed decision. Most will only look at the cost. You need to bring into view this high cost of inaction. The audience is going to spend the money. The only question now is about where they will do it. It will be with the person that invites them to do so in a timely manner.
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