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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.

More by this author

Michael Davidson

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

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Last Updated on March 5, 2021

Science Says People Who Talk To Themselves Are Geniuses

Science Says People Who Talk To Themselves Are Geniuses

I talk a lot to myself. It helps me to keep my concentration on the activity on hand, makes me focus more on my studies, and gives me some pretty brilliant ideas while chattering to myself; more importantly, I produce better works. For example, right now, as I am typing, I am constantly mumbling to myself. Do you talk to yourself? Don’t get embarrassed admitting it because science has discovered that those who talk to themselves are actually geniuses… and not crazy!

Research Background

Psychologist-researcher Gary Lupyan conducted an experiment where 20 volunteers were shown objects, in a supermarket, and were asked to remember them. Half of them were told to repeat the objects, for example, banana, and the other half remained silent. In the end, the result shown that self-directed speech aided people to find the objects faster, by 50 to 100 milliseconds, compared to the silent ones.

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“I’ll often mutter to myself when searching for something in the refrigerator or the supermarket shelves,” said Gary Lupyan.

This personal experience actually made him conduct this experiment. Lupyan, together with another psychologist, Daniel Swigley, came up with the outcomes that those to talk to oneself are geniuses. Here are the reasons:

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It stimulates your memory

When you are talking to yourself, your sensory mechanism gets activated. It gets easier on your memory since you can visualize the word, and you can act accordingly.[1]

It helps stay focused

When you are saying it loud, you stay focused on your task,[2] and it helps you recognise that stuff immediately. Of course, this only helps if you know what the object you are searching looks like. For example, a banana is yellow in colour, and you know how a banana looks like. So when you are saying it loud, your brain immediately pictures the image on your mind. But if you don’t know what banana looks like, then there is no effect of saying it loud.

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It helps you clarify your thoughts

Every one of us tends to have various types of thoughts. Most make sense, while the others don’t. Suppose you are furious at someone and you feel like killing that person. Now for this issue you won’t run to a therapist, will you? No, what you do is lock yourself in a room and mutter to yourself. You are letting go off the anger by talking to yourself, the pros and cons of killing that person, and eventually you calm down. This is a silly thought that you have and are unable to share it with any other person. Psychologist Linda Sapadin said,[3]

“It helps you clarify your thoughts, tend to what’s important and firm up any decisions you are contemplating.”

Featured photo credit: Girl Using Laptop In Hotel Room/Ed Gregory via stokpic.com

Reference

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