Imagine that I’m going to auction a $100 bill. The bidding starts at $1.
The regular rules of auctions apply with one change: if you are the second-highest bidder, you don’t get the $100 bill but you still have to pay what you bid. OK? Go.
I get bids for $1, $2, $3. Why not? Someone might win $100 for only $3! But the bids keep coming.
Once they get to $99, the person offering $98 thinks, “Uh oh. The other person isn’t backing down.” They raise their bid to $100, so as not to be the second-highest bidder and lose it all.
But now the person offering $99 raises their bid to $101. Better to lose only $1 than $99, right? Soon they’re offering me well over $100 to buy a $100 bill, just hoping the other person quits first.
The real problem was 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 bad life situations this way. A homeowner buys a house at the top end of their budget. A romantic falls for someone who’s already in a relationship. Later they complain about how they’re so in debt, or their sweetheart is cheating.
Before you start something, think of the ways it could end. Sometimes the smart choice is to say no to the whole game.