You might have heard this one before. If not, pay attention. It’s a good one.
Imagine I announce I am going to sell a $100 bill by auction, and the bidding starts at only $1.
The only rule of the game is this: if you are the 2nd-highest bidder, you still have to pay what you bid, but you don’t get the $100 bill.
Of course I get some bids for $1, $2, $3. Why not? Hey - a chance to get $100 for $3!
The bids keep coming in. By $51 I’m happy - I’m going to profit now.
Once they get to $90, there’s less enthusiasm, but reason to stay in.
Once they get to $99, though, the person offering $98 thinks, “Uh oh. The other person isn’t backing down,” and raises their bid to $100 so as not to be 2nd-lowest and lose the entire $98.
But now the person offering $99 raises their bid to $101. Better to lose only $1 than $99, right?
Soon they’re offering $110, $120, $150. This game could go on forever.
The real problem: not thinking it through in advance.
When the game starts, it’s easy to think short-term and say, “Ooh! Good deal!”
Then when it’s too late, you slowly realize, ”Uh-oh. What have I done?”
A lot of people get into life situations like this.
The entrepreneur who borrows a lot of money to test an idea.
The homeowner who bought a house at the top end of their budget.
The romantic who gets into a relationship with someone who is already in a relationship.
You can hear them whining about how they’re so in debt, or their sweetheart is cheating.
Oops! Didn’t think that one through, huh?
The game was clearly rigged against them, so the smart choice is to not play that game at all. We should always ask, “How will this game end?”
It’s hard to think through the long-term implications of everything we’re doing now.
It’s hard, but it’s worth the effort. I’m just posting this here as a reminder (to myself, too).