By KAI RYSSDAL and MEGAN LARSON - New York Times News Service
So you want to be a writer. Or an artist. Or to open a cupcake shop. What you'll hear, often, is that you should pursue your dream. Follow your passion. Quit your job and live the life you want. That advice should come with a bright yellow warning sticker: Your dream may end in disaster.
Take fashion editor Michelle Dalton Tyree and her sister, Jacqueline Dalton. They opened a Los Angeles boutique, Iconology, in 2006. The interior was custom-made chic - white walls, black trim and refurbished hot pink Louis XVI bergeres. And then there were the clothes.
"We were the only ones carrying Karl Lagerfeld's collection - us and Fred Segal," Tyree recalled proudly. "We would have studio stylists for TV shows come in and drop 10 grand in 30 minutes.
"It was a unique store and there was a lot of love put into it," she added.
All that love - and some great press - didn't stop the store from failing. The sisters closed Iconology two years later. What came next was what Tyree described as a "financial bloodbath" from which she emerged in December after four years of struggle.
Tyree acknowledges that she made rookie mistakes. The location wasn't great, and she didn't have enough of a financial cushion to withstand the ups and downs in the market. High-end fashion isn't cheap to stock. And a three-month Hollywood writers' strike, plus the looming financial crisis of 2008, helped drive away customers.
But even when the future looked grim, Tyree hung on. In fact, she dug in. She bought more inventory for the racks and threw celebrity-fueled parties at the store to generate buzz.
"Your gut says this could be a problem, but your head overrides it because you have just put in this huge investment," she said. "You are hanging on to not just the dream, but you are hanging on to the sweat equity and what you put into it financially."
Human beings, by nature, don't like to turn their backs on what are called "sunk costs," said Craig Fox, who teaches decisionmaking at the University of California, Los Angeles. When a lot of money is put into something - a small business, stocks or even an education - and it can't be recovered or is otherwise "sunk," few of us can just walk away. Basically, no one likes to lose face.
Michael Dearing can relate. Today, he runs his own venture capital firm in Silicon Valley, Harrison Metal, which makes small-seed investments in technology companies. He also teaches product development to aspiring entrepreneurs at Stanford University. But back in the '90s, when he was fresh out of Harvard Business School, he, too, sank a lot of money into his dream of owning his own store.
The Industrial Shoe Warehouse had five outlets in Los Angeles that sold work boots (think back to the Dr. Martens craze). "It had a vibe of, like, Urban Outfitters - concrete floor, high beam ceilings, all the stock was on the floor," Dearing said. "We had a really good business for a while."
But, in the end, "it was what you would call a splat-against-the-wall failure."
Dearing said the economics of running a shoe store were tougher than expected. Plus, the business grew too fast. Then Dearing's business partner wanted out.
He struggled to keep the business afloat because, he said, it felt dishonorable to let it go. "I personalized the outcome to a degree that it was unhealthy," he said. "I thought failure was total and permanent - and success stamped me as a worthwhile businessperson."
That's a normal reaction, says Dr. Richard Peterson, a psychiatrist and managing director of the financial consultancy MarketPsych, based in New York. "There is a part of the brain called the anterior insula, and that is where we process losses," he said. "It creates a physical sensation of pain, and it also creates a sensation of disgust."
That area of the brain sets off pain if you get shocked with electricity, for example. But, Peterson noted, "you see the same response in people who are losing money."
So to avoid the pain, we hope, Peterson said.
"There's a whole host of what my colleague Shelley Taylor" - a psychology professor at UCLA - "calls positive illusions," Fox said. "We overestimate our ability to control outcomes that have some element of chance" and we "tend to overestimate the extent to which good things are going to happen, especially to us."
For both Tyree and Dearing, hope - and money - finally ran out.
"There was a moment when we went to our attorney's office to declare bankruptcy," Tyree recalled. "I looked down and my hands were shaking, tears welling up, and he looked at us - he was this fabulous Ari Gold-ish character - and he said, 'Michelle, some of these companies I work with are on their fifth and sixth bankruptcies. You haven't seen anything yet.'"
That advice, she said, "put it into perspective. I thought, okay, this is not over for me, this was one piece that failed."
Dearing liquidated his business in what he called an "excruciating" time. He turned to eBay to sell shoes, cash registers, delivery trucks and warehouse equipment to repay creditors and pay his employees' severance. "I was dead broke," he said. "This was probably one of the hardest times, deciding whether I was going to buy food for my animals or dinner for me."
But he and Tyree moved on. After selling the contents of his store on eBay, Dearing landed a job there a few months later. Then he took a post at Stanford's Institute of Design.
"I thought I had one shot to be successful," he said. "I had no idea that my career - or anybody's career - is actually a multiround process and that you had many, many at-bats."
Tyree opened a marketing and public relations firm, Blab Communications, building on her talents at getting news coverage for her store. She also started writing again. Her publication, Fashion Trends Daily, is now 3 years old.
This time around, she's not focused on a specific outcome for her project.
"It is such a fabulous vehicle for so many different directions," she said. "I am not looking at it as: Will it fail or will it succeed?"
Dearing would approve. He tells his students that the "suffering comes from being attached to the outcomes."
As paradoxical as it sounds, he said, "If you stop worrying about the outcomes, you will achieve a better outcome."
And if you ask either of them if they have any lingering pangs about those earlier, dashed dreams, the answer, even with all that money lost, is no.
So pursue your life dream, whatever it is, but with caution. Or at least a cushion of savings.
Kai Ryssdal is host and senior editor of the public radio program "Marketplace." Megan Larson is a producer for the program.