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How the Sunk Cost Fallacy Makes You Act Stupid

How the Sunk Cost Fallacy Makes You Act Stupid

Do you think you make smart, rational decisions most of the time?

Chances are good that even if you pride yourself on being rational most of the time, you still occasionally fall for the sunk cost fallacy.

What is this fallacy?

In economics, a sunk cost is any past cost that has already been paid and cannot be recovered. For example, a business may have invested a million dollars into new hardware. This money is now gone and cannot be recovered, so it shouldn’t figure into the business’s decision making process.

Or, let’s say you buy tickets to a concert. On the day of the event, you catch a cold. Even though you are sick, you decide to go to the concert because otherwise “you would have wasted your money”.

Boom! You just fell for the sunk cost fallacy.

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Sure, you spent the money already. But you can’t get it back. If you aren’t going to have a good time at the concert, you only make your life worse by going.

How Often Do You Fall Into The Sunk Cost Fallacy Trap?

Unfortunately, an awful lot.

If you take a moment, you can probably think of all sorts of situations where you make irrational decisions because of the sunk cost fallacy.

To help you see how common this is, here are a few examples.

1. “I might as well keep eating because I already bought the food.”

I do this one all the time. If I go to a restaurant and become full after eating most but not all of my food, I feel compelled to eat the rest so that it isn’t “wasted”.

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But in reality, nobody else will eat that food after me. It’s not getting recycled or given to poor people. It’s just thrown out.

So if I feel uncomfortable, I shouldn’t eat the food. It’s a sunk cost, and I only lose by gorging myself further.

2. “I might as well keep watching this terrible movie because I’ve watched an hour of it already.”

Or reading a terrible book that you are 100 pages into, or continuing a T.V. series on Netflix that has gone downhill, etc.

It doesn’t matter that you’ve already invested time into whatever media you are consuming. If you don’t like the movie, you can walk out of it.

I once made the mistake of staying in the theater during Dinner For Schmucks despite quickly realizing how terrible it was. It never got better, and I wasted even more of my time by staying.

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3. “I might as well keep going to a bad/useless class that I paid for.”

If you join a club or take a class to learn a new skill, you might feel compelled to continue even if you don’t enjoy it.

After all, you paid the $100 entry fee and you’ve gone to 3 of the 8 sessions, so you might as well finish, right?

Of course not. If you don’t feel you are getting anything out of it, bail. Write off the money and the time you spent, and save yourself from the other five classes. Don’t waste any more of your time.

4. “I might as well continue dating someone bad for me because I’ve already invested so much in them.”

This is unfortunately all too common.

If you put a lot of emotional investment into a relationship, it can be very challenging to break it off. This can be true of any relationship, not just romantic ones. Perhaps one of your good friends is no longer a positive influence on you. Years of emotional investment makes it very uncomfortable to cut your ties, but you might have to.

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Well, How Do I Free Myself?

We fall victim to the sunk cost fallacy because we are emotionally invested in whatever money, time, or any other resource we have committed in the past. The most important step to freeing yourself from making poor decisions based on sunk costs is to recognize the logical fallacy. Simply being aware of it will help you tremendously in making more rational decisions in the future.

By reading this article, you’ve already taken that huge first step.

But when that isn’t enough, I suggest you write out a pros and cons list. If the only pro of continuing to do something is to feel better about the emotional investment you’ve made, clearly you should go in the other direction.

Despite how common this fallacy is, you can see through it fairly easily most of the time. Don’t let it make you act stupidly.

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Michael Davidson

Michael teaches English in Israel while blogging about how to live a happier and healthier life.

How Not to Be Boring (And Start to Be More Interesting) How the Sunk Cost Fallacy Makes You Act Stupid

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Last Updated on November 4, 2020

15 Simple Ways To Make Self Improvement That Will Change Your Life

15 Simple Ways To Make Self Improvement That Will Change Your Life

Self-improvement doesn’t have to be big mind-blowing changes; it can actually be simple steps to improve upon what you already have to get you where you want to be.  However, what you will need is consistency, determination and wiliness to try some things that will stretch and challenge you.

Rather than setting your sights way off into the future, which leaves you feeling like you’ll never make it, you can start following these simple and effective self-improvement steps today.  So if you want to make an immediate impact on your life and are willing to take action, then keep reading— you’ll going to love these!

1. Be willing to work hard.

As with anything in life, if you want something, you’ve got to work hard to get it.  This doesn’t mean you burn the candle at both ends, leaving you exhausted and leaving your personal life in ruins.  It merely means that when you want something badly enough, you’ll put in the time to get there.  Action is what’s important here and the more ‘inspired’ the action is, the better the results in the end.

2. Make sure you have friends who you can talk to.

Sharing the load is important as with any self-improvement. If you can communicate with others and get feedback on how you are doing then that’s great.  We all need ‘cheerleaders’ in our corner to keep us going when times get hard, but you also need to have people who will tell you how it is even when you don’t want to hear it.  So make sure you have a good support network around you, especially those people whose opinions you respect.

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3. Adapt to your circumstances rather than over-thinking them.

Sometimes, we can hit a hard period. Perhaps you’ve lost your job or your partner has left you.  Instead of over analyzing the situation, learn to adapt to your circumstances and accept them as they are.  It’s not about making your circumstances into some kind of a drama; remember, what you focus on expands which means you’ll get more of it.  You then don’t become your problems and you’ll feel a lot less burdened by them.

4. Ensure that you use your time wisely.

Time is of the essence, some might say; whilst others will say that time is an illusion.  One thing we do know is that you have one life on this planet, so how you use that time is of the utmost importance.  So how can you use your time wisely? Only you know how to do that, but look at how you currently spend your days: do you sit working all day, get home, eat and then sit slumped in front of the TV for the rest of the evening?  Your time on this earth is precious, so isn’t it time to make use of the time you have left? Try something new, go for a walk, learn a new language or meditate but make sure it’s something you absolutely love.

5. Always be consistent.

A wonderful way to self-improvement is to make changes to how you do things.  For example, with your friends, are you always the unreliable one who bows out of an arrangement just before it happens? Or are you someone who starts a new exercise routine and then stops doing it 3 weeks into it?  Whatever it is and whatever you do, always be consistent. When you make a commitment, stick to it. It will improve your life immeasurably you’ll feel more confident and happier with yourself, especially because you’ll know that whatever you tackle, you’ll be able to consistently do it!

6. Go and find your happy place.

No, I’m not saying “place” as in popping to your local bar or restaurant and gorging yourself on your favorite drinks or food. What I’m saying is to find out what you love to do, what makes you happy and go there.  Your happy place is a place where you find peace, where you lose yourself and feel contented.  Meditation is a great way to find your happy place; it brings you back to you and ensures that you are always living in the present moment.

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7. Make sure you embrace all your emotions.

In life you are going to find that it throws you some difficult challenges, sometimes it will bring out your fears and lead you into uncertainty, and other times it will be joyful.  It’s important to embrace all emotions that come up in your life, embrace them wholeheartedly and understand why they are there and then let them go.  Try not to dismiss or resist them because remember “what you resist, persists,” so embrace them each and every time.

8. Always be prepared to step out of your comfort zone.

The idea of stepping out of your comfort zone for some people can leave you paralyzed with fear; however for any changing in your life, your comfort zone will always have to be stepped out of.  It doesn’t have to be something big, like doing a sky-dive or something just as crazy. However, it’s worthwhile to change something that you’d once have feared, like going to the cinema on your own or eating at a sushi restaurant when the thought of trying raw fish which would normally mean you running for the hills.

So try something new—it doesn’t have to be wacky, but it has to challenge you!

9. Be on hand to help others.

Whether it’s helping a stranger on the street or a family member or a friend helping someone else either in their time of need, lending a helping hand is a wonderful and simple self-improvement to make.  Giving to others is not only beneficial to those you are helping but also to yourself; it can give you a sense of purpose, of contribution and also takes your mind of your own troubles and worries.

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10. Live in the present moment.

A wonderful self-improvement tool is to live in the present moment, to live in the now.  It is within this moment that you’ll appreciate all that you have and see the beauty in the simplest of things.  Being mindful of your current circumstances and bringing your mind back to where it belongs will bring about a happier way of life instead of constant worry or stressing about the past or future—both of which do not exist. Only the present moment exists. When you get used to living that way, you’ll never want to go back!

11. Learn something new.

There is nothing so liberating as learning something new; it can lift both your confidence and self-esteem and give you a great reason to meet new people.  If you continually top up your brain activity by learning something new all the time, you’ll feel on top of your game and want to share the knowledge you have learned. There is nothing quite so empowering as learning a new tool in life that can either improve your circle of friends or raise confidence levels—or both!

Reading is also a great way to help you learn something new:

12. Exercise daily.

This seems an obvious one, but exercise is so important not only to your health but also to your spirit.  We all know that after exercise, the world can feel a brighter and more positive place, so why don’t we do it more often?  Exercise isn’t about getting the perfect body or losing weight; it’s more about feeling good inside and out!  With a healthy body comes a healthy mind—so start something today. Even if it’s just a daily walk, it’s better than staying on that couch, again.

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13. Go to new places, travel a bit.

I’m not saying go fly off to some far away distant forgotten land—although you can if you so wish. It’s more about going to new places and experiencing life outside of your own back yard.  Too many of us stay in one place too often. We only see the same people, the same streets and do the same things each and every day.  If you want to improve your life, get out there and see the world and what it can offer.  You can start by going to a town or city you’ve never been to in your own country and checking out the architecture, the landscapes and the people.  Anything new is good, so get out there!

14. Listen to uplifting music and dance.

If there’s one thing that can really improve your life and get you excited about it, it’s listening to great uplifting music and dancing.  When was the last time you really let go?  Let it all hang loose and got into a piece of music and let yourself go?  Dancing, like exercise, makes you feel great. It releases all kinds of emotions and can make you feel unbelievably good.  Self-improvement isn’t all about the serious stuff; it can be something as simple as finding new music, music that inspires you and makes you dance and have fun!

15. Get up earlier than normal.

This is the last one, and it’s last because it’s one of those self-improvement tips that we all know is a good thing, yet we seem to avoid it at all costs!  If you think about it, the earliest part of the day is when your brain is most active because it’s been turned off for the last 7 hours or so.  So don’t you think it’s best to get all those things above done in the morning?  Things like exercise, meditation and dancing, which can all be done in the first part of the day.  Take it from me: this early morning stuff can really get your day started with a bang!

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Featured photo credit: Laura Chouette via unsplash.com

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