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How the Sunk Cost Fallacy Makes You Act Stupid

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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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More by this author

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 18, 2021

10 Proven Ways to Judge a Person’s Character

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10 Proven Ways to Judge a Person’s Character

We all fall into the trap of judging a person’s character by their appearance. How wrong we are! All too often, the real character of the person only appears when some negative event hits them or you. Then you may see a toxic person emerging from the ruins and it is often a shock.

A truly frightening example is revealed in the book by O’Toole in Bowman called Dangerous Instincts: How Gut Instincts Betray Us. A perfectly respectable, charming, well dressed neighbor was found to have installed a torture chamber in his garage where he was systematically abusing kidnapped women. This is an extreme example, but it does show how we can be totally deceived by a person’s physical appearance, manners and behavior.

So, what can you do? You want to be able to assess personal qualities when you come into contact with colleagues, fresh acquaintances and new friends who might even become lifelong partners. You want to know if they are:

  • honest
  • reliable
  • competent
  • kind and compassionate
  • capable of taking the blame
  • able to persevere
  • modest and humble
  • pacific and can control anger.

The secret is to reserve judgment and take your time. Observe them in certain situations; look at how they react. Listen to them talking, joking, laughing, explaining, complaining, blaming, praising, ranting, and preaching. Only then will you be able to judge their character. This is not foolproof, but if you follow the 10 ways below, you have a pretty good chance of not ending up in an abusive relationship.

1. Is anger a frequent occurrence?

All too often, angry reactions which may seem to be excessive are a sign that there are underlying issues. Do not think that every person who just snaps and throws his/her weight around mentally and physically is just reacting normally. Everyone has an occasional angry outburst when driving or when things go pear-shaped.

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But if this is almost a daily occurrence, then you need to discover why and maybe avoid that person. Too often, anger will escalate to violent and aggressive behavior. You do not want to be near someone who thinks violence can solve personal or global problems.

2. Can you witness acts of kindness?

How often do you see this person being kind and considerate? Do they give money to beggars, donate to charity, do voluntary work or in some simple way show that they are willing to share the planet with about 7 billion other people?

I was shocked when a guest of mine never showed any kindness to the weak and disadvantaged people in our town. She was ostensibly a religious person, but I began to doubt the sincerity of her beliefs.

“The best index to a person’s character is how he treats people who can’t do him any good, and how he treats people who can’t fight back.”

Abigail Van Buren

3. How does this person take the blame?

Maybe you know that s/he is responsible for a screw-up in the office or even in not turning up on time for a date. Look at their reaction. If they start blaming other colleagues or the traffic, well, this is an indication that they are not willing to take responsibility for their mistakes.

4. Don’t use Facebook as an indicator.

You will be relieved to know that graphology (the study of that forgotten skill of handwriting) is no longer considered a reliable test of a person’s character. Neither is Facebook stalking, fortunately. A study showed that Facebook use of foul language, sexual innuendo and gossip were not reliable indicators of a candidate’s character or future performance in the workplace.

5. Read their emails.

Now a much better idea is to read the person’s emails. Studies show that the use of the following can indicate certain personality traits:

  • Too many exclamation points may reveal a sunny disposition
  • Frequent errors may indicate apathy
  • Use of smileys is the only way a person can smile at you
  • Use of the third person may reveal a certain formality
  • Too many question marks can show anger
  • Overuse of capital letters is regarded as shouting. They are a definite no-no in netiquette, yet a surprising number of  people still use them.

6. Watch out for the show offs.

Listen to people as they talk. How often do they mention their achievements, promotions, awards and successes? If this happens a lot, it is a sure indication that this person has an over-inflated view of his/her achievements. They are unlikely to be modest or show humility. What a pity!  Another person to avoid.

7. Look for evidence of perseverance.

A powerful indicator of grit and tenacity is when a person persists and never gives up when they really want to achieve a life goal. Look for evidence of them keeping going in spite of enormous difficulties.

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Great achievements by scientists and inventors all bear the hallmark of perseverance. We only have to think of Einstein, Edison (who failed thousands of times) and Nelson Mandela to get inspiration. The US Department of Education is in no doubt about how grit, tenacity and perseverance will be key success factors for youth in the 21st century.

8. Their empathy score is high.

Listen to how they talk about the less fortunate members of our society such as the poor, immigrants and the disabled. Do you notice that they talk in a compassionate way about these people? The fact that they even mention them is a strong indicator of empathy.

People with zero empathy will never talk about the disadvantaged. They will rarely ask you a question about a difficult time or relationship. They will usually steer the conversation back to themselves. These people have zero empathy and in extreme cases, they are psychopaths who never show any feelings towards their victims.

9. Learn how to be socially interactive.

We are social animals and this is what makes us so uniquely human. If a person is isolated or a loner, this may be a negative indicator of their character. You want to meet a person who knows about trust, honesty and loyalty. The only way to practice these great qualities is to actually interact socially. The great advantage is that you can share problems and celebrate success and joy together.

“One can acquire everything in solitude, except character.”

Stendhal

 10. Avoid toxic people.

These people are trying to control others and often are failing to come to terms with their own failures. Typical behavior and conversations may concern:

  • Envy or jealousy
  • Criticism of partners, colleagues and friends
  • Complaining about their own lack of success
  • Blaming others for their own bad luck or failure
  • Obsession with themselves and their problems

Listen to these people talk and you will quickly discover that you need to avoid them at all costs because their negativity will drag you down. In addition, as much as you would like to help them, you are not qualified to do so.

Now, having looked at some of the best ways to judge a person, what about yourself? How do others see you? Why not take Dr. Phil’s quiz and find out. Can you bear it?

Featured photo credit: Jacek Dylag via unsplash.com

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