This short podcast episode (Mike Andes) explains the concept of "cost of inaction" (COI) and recommends reframing decisions by measuring what you lose when you do nothing. Andes uses loss-aversion psychology and a concrete advertising campaign example (10 hours at $80/hr and $800 ad spend yielding $3,200 profit) to contrast traditional ROI with COI, arguing that inaction often carries a measurable, painful cost and that progress/action is preferable to perfection/passivity.
Okay, today I'm going to talk about how you can kind of trick yourself into getting more done. A lot of people ask me, how do I actually get motivated to do I know I need to do in my business? And you can kind of use this hack to trick yourself into getting things done. And the reason, what this really all comes down to is we, as humans, we hate losing things. We have loss avoidance. And typically, the pain of losing something is actually greater than the pleasure of getting something new or something better. For example, you get 50% off your tires. On the flip side, I could also say that someone is going to come and steal two of your tires. Now, literally, we won't go down the street for the 50% off, but we will go after someone and we will press charges if they try to steal our two tires. Why? Because we get much more agitated and worked up over losing something than gaining something. And so we can kind of trick ourselves into getting stuff done in our business that we know needs to get done. And we're just procrastinating. We have effort, and then we have cost. Let's just say, for example, you're doing an advertising campaign, you're trying to get more leads, and you know it's going to take you 10 hours. And let's just say that you're usually charged $80 an hour. So 80, it's like $800 worth of effort. That's the cost of your effort. And if you're doing this yourself, it's literally actually not costing you in terms of money, anything. It's just costing you time. The next thing is actual cost. Let's assume here that we actually do have a real cost of running some advertising. Okay? And let's assume it's $800 as well, just for the sake of easy numbers. This could be just about any type of ad that you're looking to be able to add to your business. So we got the. The cost right here of the actual ads. $800. We have the effort. $800. Assuming that you're worth $80 per hour and you're going to spend 10 hours. Now let's go ahead and look at what happens when we look at return on investment. This is what everyone wants to talk about. So we do this now. We go out and run the ads, and we make a bunch of revenue. And now we're going to assume that we're going to actually make $3,200 in profit from these ads. So you run these ads, maybe you get like 10,000 or $11,000 worth of revenue, but we actually make $3200 in profit. Now, if I stack up the $800 in effort and I stack up the $800 worth of actual price, I could then say that all of this money up here, the extra sixteen hundred dollars, is going to be return investment. So essentially, all of this stuff up here is gravy, because all the direct costs, I take care of all of that. But I got 2x on my money, which means I spent $1600, and I turned it into 3200. Fantastic. I got a 2x. Pretty exciting stuff. Now, I want to take one more thing, though. We looked at what is ROI. That's what we're measuring there. We have a 2X, went from $1600 in our cost and our effort, and we turned it into $3200. Fantastic. We have a 2X. Now all of a sudden, return on investment is really, I am going to gain something. And now I'm going to trick myself into trying to think about what it would cost for me not to do this activity. And so if I take this one, I actually like this, and I call this the cost of an action. So, coi. So instead of roi, I measure coi. And coi is simply the cost of inaction. And what you can now tell yourself is, I am literally going to lose sixteen hundred dollars by not running these ads. It's the cost of inaction. Because every single day, we're making decisions to do or not do certain things. And we can all very easily, usually measure what we get in terms of ROI from what we spend into our business, the amount of effort we expend, the money that we spend and invest into the business, we look at our roi. But what about the cost of inaction? Because in this case, not doing anything cost me $1,600. For some people, they would rather not lose the $1,600 than get $3,200 in profit. And so I recommend if you really struggle with knowing what to do in your business and not doing it, this is another way to frame it. And that is not doing the action that you know needs to happen in the business has downside consequences. It's actually going to prevent you from getting any upside whatsoever. And not doing anything has a real cost. So if I don't do anything, I'll be able to think about it. No, doing nothing actually has a cost to it. The same way that if you put money into a bank account and you're like, oh, well, I have money in my bank account or underneath my mattress and it's earning interest, it's earning.0,1 5% per year. But there's a cost of inaction. By just putting that money underneath your mattress or putting in a savings account, there's a cost and it's called inflation. And every single year you're losing out 3, 4, 5%, whatever it is based on when you're watching this video, what inflation is, there's a cost of inaction, There's a cost of not actually deploying that money or that effort into creating return for your business. And that is the inability to make decisions is eating away at your ability to grow your business. And so that's why so often taking action is so underrated. Because what we don't do, we never actually see the consequences of. But what I can guarantee you, just the same way that inflation slowly eats away and is the silent killer of many people that save money instead of investing their money, that's the true cost of inaction, not investing your money. The difference between what you would make and what it sits in the bank, making nothing is the cost of inaction. That's why I default to that. Progress is better than perfection. Because I'd rather get some return. I'd rather put my effort and my money into something I'd rather wear out than rust out. When it comes to effort, I'd rather go broke trying to invest my money and get a massive return than just sending $10 underneath my mattress and hoping that I somehow get rich. It happens once in a blue moon, you get the lottery ticket. That's what everyone goes towards. But really, the vast majority of people have massive amounts of in action debt. And if you're the type of person that avoids loss at all measures, start thinking in terms of the cost of what it's costing you to not do anything. It might help you make a decision faster, might make you pull the trigger, might make you take the next jump in the business and put a little bit more risk behind what you're doing.
