Sunk Cost (fallacy) and Steve Cohen
I work with a lot of money. Money comes in, money goes out. Upwards of $1.5m a month. It's a rapid fire cash flow environment, where solid and up-to-date book-keeping and payable processes guides the way. Gotta know where you stand at all times.
But even though I'm a personal financial literacy advocate, and fanatic, I still can step away from myself and watch the same emotional struggles about the best use of money, and none more dangerous than the Sunk Cost experience. Sunk costs are defined as money and time and energy expended on a project, initiative, idea or business - money you have in it. It can't be changed. You already spent it. Sunk Cost Fallacy revolves around the human brain reluctance to pivot away from an initiative that you have measurable time and money invested- chasing the dragon some more in hopes of recouping the loss, further aggravating the loss. Happens with stocks when they decline and you know you holding a loser - the disinclination to sell it is emotional, not mathematical. The hope is that some variable or factor will change that will allow you to recoup and perhaps even gain some ROI.
Problem is, many times you just don't know. Success or momentum could be just around the corner. Perseverance is the mantra of any endeavor, especially entrepreneurial, and I guess that's what separates the ultimate winners and losers in the game of business, especially small business where resources are always scarce - those that can clearly identify losing paths that being traveled, and pivot away, quickly, stemming the bleeding at the first opportunity, instead of chasing the loss.
One thing the pandemic did was allow many businesses to make tough financial decisions under the cover of the pandemic, without judgment, with the ability to blame someone/something other than themselves. Culling employees, shutting divisions, selling off poorly performing assets. I bought a $5m project for $200,000 that the owners had held for 15 years hoping something in their luck would change. I still credit the pandemic with two things - increased skill of leadership since it brought challenges never seen before that needed action now, and the ability of businesses to streamline their operations with no repercussions from stockholders or community. Tough decisions that wouldn't fly normally became commonplace, and businesses became more efficient, lean and strategic and most importantly, focused. The pandemic forced a focus for survival, and most benefited from the concentrated and concerted return/attention to the basics. The counterintuitive thing is the NYC money manager who took a $4m haircut when he sold me the project for $200k never looked back, strengthened his focus, and is stronger than ever. Chasing losers takes a lot of energy and resources.
I had to confront a personal (business) sunk cost situation recently, with a 6 figure partner to dance with. But in the end, I beat back the emotions, looked at as a math and business problem, and discarded the problem with a stroke of my pen.
Then pulled a hedge-fund guru Steve Cohen, where after he paid a few billion dollars to the US Gov't to settle his problems, just to flex, he went on a spending spree showing up in headlines of art auctions and then ultimately bought the Mets.
I'm doing a little of that, with the pursuit of a new 30 acre subdivision in Kerhonkson, a long vacation in Costa Rica, and the addition of a new multi-play room and new garage at my abode. The new play room sports a ping pong table, electronic dart board, and a killer home theater with a sound system that blows the doors off.
And some shelves to show off my 85 piece typewriter collection.
Got one closing done yesterday and another one set for Monday.
I wonder if any of these lines of homes will ever reach 100. Time is running out for this generation.
End of Summer...
Well, with temps in the mid-40's, like clockwork, summer is winding down (note play on words - clockwork...winding down). Then up into the 70's. In the convertible yesterday afternoon, it even called for a sweater.
We have a big sale today, and another in 7 days, and then another in 60 days. That will leave us with 4 spec homes next year to sell that are already built or nearly completion. Gives me lots of latitude to change directions.
Friday night lights. The booster club just bought a canon and now half the dads are down there blasting away.
Lucas is getting in the habit of inviting people over, and before I know it half the football team is sleeping over, with kids sleeping everywhere from the media room, to the screened porch, to my living room couches. Good kids though. As I tell Lucas, Lulu the dog gets a lot of privileges and a long leash (I know, too clever by half), and the way to get treated the same is to be well-behaved. It's probably weird for the kids seeing a single dad flex with pancakes, house work, dinners and the like. I'm sure the Moms drive the show in most of their households and the dads have a different role altogether.
We really suck this year on the baseball diamond, after winning the championship 2 years in a row. Errors galore and quiet bats.
I'm always tinkering around my house with this and that project - if you can call converting the existing 2 car garage into a large man-cave with ping pong, theater grade TV area, and an electronic dart board. This week will be the finish line.
I live in Milford PA, a cool town, with a fastidious block road grid and lots of charm.
Lulu has lots of perches she hangs out on. She likes how the bluestone heats up on a sunny day.
Jared Covit's all up in arms over the photo I cut and pasted from the internet, threatening this and that. You'd have to wonder how many baseless causes of action he would file before learning a lesson.
I'm rereading Killer Angels, a Michael Shaara historical fiction account of the Battle of Gettysburg and listening to a true crime audio book on the Murdaugh family in South Carolina. Killer Angels, written in 1974, places the disastrous battle for the confederacy squarely on the lap of General Lee, who seems, in this book, to be engaging in this battle in order to bring the war to a close - win or lose.
Jared Covit's Friviolous cause of action #5 and 6 dismissed...
My password app is warning me with a required override that I've used 'similar passwords too much'. For now, I'm satisfied just making the step and over-riding it, but at some point I'll need to get in there and mix it up a bit.
Another day closer to selling 2 more homes. Great homes - an American Four-square, and an American Ranch, in Olivebridge. That'll be a $9m project - the numbers in the profit and loss terrain really aren't that impressive, but a percentage of a number gets bigger as the number gets bigger. Actually, the percentage stays the same but the number gets bigger on bigger projects. Ok, like duh. But anyways, especially since I was using all cash, the liquidity is new if nothing else the investment cycle begins to return on the investment - of time and money, and attention.
Listen, the word for my blog, in the world of google search, is authority. I'm an authority - using their dense and complex and ever-evolving algorithm, they believe this blog should be weighted heavily in the topics I cover. It's no small feat - being recognized by a world-domineering tech company as being relevant and an authority about which you speak.
There are lots of things we do daily that are pretty one-off, meaning I'm not seeing a lot of copycat hurdlers - developing, designing, building and then selling a home, for decades. That's pretty much non-existent.
The pension and profit sharing programs we offer are unheard of in small businesses.
The benefits, holidays, work environment, year round stability as an employer
Running 18 jobs across 3 counties with 3 people in the office.
There's a lot more we do that when you get a little distance from it, you see it shine and shine brightly.
I mention the google thing cause our current topic du jour, Jared Covit, is now the proud host - position 1 and 2 - of our posts about the meritless lawsuits he pursued.
When Martin Shell, Esq and I guess proprietor of Martin Shell Law Firm- a firm so advanced it doesn’t seem to have a website - writes my attorney in the Jared Covit and Lauren Rich case that I should remove the picture of Jared Covit I found on that thing called the internet and copy and pasted it to my blog, that I was to remove it immediately because it was an unauthorized use of his image, and that I should be ‘advised accordingly’, I’m wondering if he got that legal threat from the same playbook that resulted in 5 of his 6 bullshit causes of actions against me and Catskill Farms - claims so frivolous it seemed like the judge was trying to conserve ink while dismissing them, and playing a game of how few words the Honor could use while disposing of the weak arguments offered up as serious legal doctrine.
I’m no Oliver Wendell Holmes, but you got to understand, that to have 5 causes of actions dismissed, a Court not allowing them to move forward at all, those causes of actions must be so meritless, and so lacking in legal basis and precedent, that the Court decides they don’t have to hear more, without hearing much at all.
Only in the insular footsie world of the law would you be allowed to file a bunch of bullshit lawsuits and have no fear of repercussions. Wouldn’t it be more fair, that if your claims can’t even pass the most liberal interpretation of the statute, that given all the benefits of the legal doubts, the claims still don’t hold up, wouldn’t we all agree that there should be some consequence to that - say the lawyer being brought up on ethics charges, or the failed plaintiff having to pay the legal fees of the wronged party? Doesn’t that make sense, to us non-lawyers? Sure, that would reduce the income of many a lawyer, as they had to be more careful and thoughtful, and I guess maybe that’s what they are talking about when you hear about trial lawyer reform, and how their lobbying body always blocks efforts to make wrongfully suing people harder.
So I asked my attorney to forward me some information on this legal doctrine of Martin Shell, this doctrine of unauthorized use of an internet photograph. I’m actually very interested in learning more about this legal theory from this grand legal mind, and I'm not being sarcastic - .
The Court seemed weary by the end of the ruling and clumps cause of Action 5 and 6 together, dismissing them both with a rationed use of words. We, for the benefit of our google relevancy testing (though Jared Covit's internet irrelevance plays a part too), will tease them apart and review them independently.
Getting right to the point, the Court opens with ...
"The Defendants' motion to dismiss the Plaintiffs' 5th and 6th causes of action based in the application of General Business Laut 349 is granted." One could wonder if the court was sensing a general trend in the legal merits of the lawsuit as it picked up dismissal momentum.
“The Plaintiffs' complaint, viewed as a whole, principally alleges that the Defendants breached a contract entered into by the parties that called for the Defendants to erect and complete a home according to the layout and specifications set forth in the parties' contract, and for the Plaintiffs, in tum, to purchase the home and the property. Consequently, the instant action is a private contract action, unique to the parties, that accordingly falls outside the ambit of GBL 349. As such, the Plaintiffs have failed to demonstrate that the Defendants' conduct was consumer-oriented, as opposed to a private conduct, or that the Defendants engaged in a deceptive practice, as opposed to allegedly breaching the terms of the parties' contact. As such,the Defendants' motion to dismiss as to the Plaintiffs' 5th and 6th causes of action is granted pursuant to CPLR 3211 (a)(1) and (7).”
Basically, it seems the theory behind all of this is because Jared Covit feels wronged, the entire world has been wronged - that because he feels my dealings with him (that has netted him $300k+ in paper profit) were mean, that the whole world feels that way - that somehow our dispute between two parties somehow reflects my dealings, period, and that I’m engaged on some sort of day to day fraudulent behavior.
Now, you have to walk a mile in my shoes over the last 25 years and $300m in community investment and untold tens of millions in profits made from reselling my homes to understand the scale of the insult to accuse me of being a fraud, and perpetrating a scheme to harm people I have spent half my life housing and bringing joy to their families, over a cumulative spans 150 years of families living safely in my homes. I'm ok with an honest business dispute. This ain't that. This is a temper tantrum, with defaming characteristics at the heart.
Jared Covit's Frivolous cause of action #3 dismissed...
"The Plaintiffs' third cause of action for unjust enrichment is also dismissed pursuant to CPLR32ll (a)(1)," rules the Court.
An action for unjust enrichment requires the proof "that (l) the other party was enriched, (2) at the plaintiff's expense, and (3) that it is against equity and good conscience to permit the other party to retain what is sought to be recovered."
In one paragraph, the Court dismisses and discards the idea that Jared Covit and Lauren Rich were a victim. The brevity of the dismissal goes to the root of how malicious and frivolous the claim was in the first place. To be the recipient of an asset that grows in value by 50% in 24 months that you were somehow victimized can only be the conclusion of worst type of inward-looking millennial stereotype.
Choose a public venue like the courts to address your problems with a goal to embarrass your building partner, be prepared for a public response. Or as Kathy said, play around, find out.
For discovery and production on the one remaining lame cause of action, we produced all the documents related to building Jared Covit's home. As I was searching and printing, it became self-evident how accommodating we are.
The pile on the right is all the times we said 'yes'. The pile on the left is when we had to audacity to say 'no'.
Impressively, we are now the first result in Jared Covit's online profile, after 36 hours. I don't easily impress myself much anymore, but this one raised my eyebrows.
