I’ve found an interesting phenomenon in business – expectation is far more powerful than reality.
It sounds counter-intuitive, but in business, a million dollar in the future is far more powerful than a million dollar today. Let’s say you have a vendor that want to get $1 million from you, they will do everything possible to please you. However, the moment you actually pay them, is the moment the situation changes from expectation to reality. There’s the $1 million, no more to be made. Bye bye.
A potential of growth, a potential to gain big business, a potential to build great things, these are the magic phrases to get people mesmorized, justified to spend spend spend. A business target hit, a piece of equipment bought, a promise actually delivered, on the other hand, become doomed as “the past”, “sunk cost”, “yesterday’s home run doesn’t win today’s ball game”.
This also applies to those hot-shot high-tech companies, their stocks were worth billions while making no profit whatsoever. However, the moment they announce that they are profitable the stock tanks. Why is that? Because at that moment all the unrealistic expectations die. So go back to our $1 million question. It is always better to pay your vendor only half million or less, so there’s the “promise” of more to come. Of course, vendors always want to sell you more than you need (an extra pair of shoes, an extra year on your contract). Why? It’s really not about getting more money from you. But rather, they want to saturate you and forget about you so that:
1) sellers can move on to the next prospective client;
2) there’s no worry that you are going to any competitors – customers who have bought three pairs of shoes are much much less likely to buy another pair.