Are you under a winner's curse?

Stop pursuing the things that cost you more than they’re worth.

THINK ON IT: Are you under a winner’s curse?

You'll often see it at auctions: the winner's curse. That's where the winner ends up paying more than market value for a product. Their eagerness to win or inability to discern the item's true market value caused them to pay more than they should; hence the curse.

The winner's curse can be seen in business, too. Look for it in the margin yield after a sales team engages in fierce battle with its competitor… and “wins” but with an unacceptable margin, or worse, a loss. Or find it in the overall investment a company makes in a continually delayed product… one that might not even meet the market’s needs by the time it gets there. Or discover it in the hiring incentives and performance outcomes for that "must-have" candidate… who turns out to be okay, but maybe not as transformative as the company expected. 

Sure, the organization might have won the battle, but was it at a cost that they could afford? Did they really get their money’s worth? 

Each of these situations possess a common characteristic: pushing something to conclusion despite costs that escalate beyond its value to the firm. That's the winner's curse. It's driven by mistaken sunk-cost reasoning: "We've already invested so much..." Therefore, we must keep going or lose out on what ground we’ve already gained. 

When you hear those words—or perhaps say them—you'll know you might be staring at a winner’s curse. 

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​​Premium subscribers: read on for ways to recognize your winner’s curse and how to lift it. 

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