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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 July 13, 2020

9 Simple Ways to Always Stay Positive

9 Simple Ways to Always Stay Positive

It’s common to be struck with a bout of pessimism, or to naturally be more towards the pessimistic end of the perspective spectrum. It’s hard to see the positives in life and become an optimist when you’re lost in the murky waters of negative thinking.

However, Henrik Edberg, the founder of The Positivity Blog is here to share nine ways we can create a more optimistic outlook and positive perspective:

“Nobody can go back and start a new beginning, but anyone can start today and make a new ending.” — Maria Robinson

When I was younger — in my teens and early 20s — I was trapped. Not physically, but mentally: by the destructive thought pattern called pessimism. This negative thinking poisoned what might have been a pretty good and opportunity-filled childhood, adolescence, and early adulthood. This pessimism created ceilings and walls where there really were none.

Throughout the period when I was ridden by pessimism, my life and I mostly stood still. Looking back, it was a terrible waste. If you are in pessimistic place, you don’t have to stay there for the rest of your life. I didn’t, for I learned to replace my negative thinking with optimism.

In this article I’ll explore nine positivity habits that have helped me to go from someone who was pessimistic most of the time to someone who is now optimistic almost all the time. I recommend to not try to add all the habits at one go but to choose one habit and to practice it for 30 days so it becomes a habit, before adding the next.

1. Ask Yourself the Right Questions

This is the simplest but perhaps also the most important habit I have discovered in adopting an optimistic mindset. The questions we ask ourselves day in and day out when we wind up in negative, difficult or uncertain situations make all the difference in our life.

A pessimist might ask him/herself questions like:

  • “Why did this happen to me?”
  • “Why do bad things happen to me all the time?”

But an optimist asks him/herself the questions that open up the mind to new viewpoints and possibilities. A few of my favorite questions for finding the optimistic perspective are:

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  • “What is one good thing about this situation?”
  • “What can I learn from this situation?”
  • “What is one small step I can take today to start solving this situation?”

2. Create a Positive Environment to Live In

The people you spend your time with and the information you let influence your mind will have a huge effect on your attitude and how you think about things.

Watch this YouTube video and learn the power of a positive environment:

So choose to:

  • Spend more time with the people who lift you up. And less time – or no time – with people who just bring you down by being negative and critical. Read: You are the Average of the 5 People You Spend the Most Time With
  • Let in the information that supports you. Spend less time on negative and self-esteem damaging media sources and spend more time reading positive and constructive blogs and books, watching motivating movies, listening to inspirational songs, and listening to audio books and podcasts created by optimistic people. Check out 12 Inspirational Movies With Important Life Lessons To Learn and 25 Most Inspirational Songs of All Time.

3. Be Grateful for What You Have (Don’t Forget About Yourself Too)

A very simple and quick way to boost the positive energy in your life is to tap into gratitude.

I usually do it by asking one or more of these questions:

  1. What can I be grateful for in my life today?
  2. Who are 3 people that I can be grateful to have in my life and why?
  3. What are 3 things I can be grateful for about myself?

Just spend 60 seconds or a few minutes during your day with answering one of these questions to reap the wonderful benefits.

4. Don’t Forget About Your Physical Self

Being an optimist isn’t just about thinking in a different way. It is also about caring for the physical part of ourselves.

I have found that working out a couple of times a week, enough quality sleep each night and eating healthy food has a huge effect on my mindset.

If I mismanage those very basic things then negative thoughts pop up far more often and I become more pessimistic and shut down about the possibilities in my life.

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So don’t neglect these basic fundamentals. Just caring for your physical self the right way can minimize a whole bunch of problems in life.

5. Start Your Day in an Optimistic Way

The way you start your morning can set the tone for the rest of your day. For example, a stress-free morning often leads to less stress during the rest of the day.

So how can you set an optimistic tone for your day?

A three-step combination that has worked very well for me is to ask myself a gratitude question during breakfast, read some positive information online or in a book very early in the morning and then follow that up with exercising.

This sets my mind on the right path and fills me up with energy for my day.

6. Focus on Solutions

A sure way to feel more negative about a situation is to sit around and do nothing about it. Instead, use the questions I shared in step one and open up your mind to the possibilities of the situation you are in.

If you have trouble to get started with taking action, ask yourself:

What is one small step I can take today to get the ball rolling?

Then take that small step forward. However small this step is, it can have a big effect in your mood and thoughts. If the step feels too big or it just makes you procrastinate, then ask yourself:

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What is an even smaller step I can take to move forward today?

The most important thing is to move forward, even if it’s a tiny baby step.

7. Reduce Your Worries

The worrying habit is a powerful and destructive one and can take over anyone’s thinking. It used to be one of my biggest obstacles to optimism and to moving forward in life.

Two effective steps that have helped me and still help me to this day to minimize the worries are:

  1. Ask yourself: how many of my worries ever happened in reality? If you are like me you will find that the answer is: very few. Most of the things you fear throughout your life will never happen. They are just nightmares or monsters in your own mind. This question can help you to do a reality check, to calm down and to realize that you have most likely just been building another imaginary nightmare.
  2. Focus on solutions and the action you can take. The worries grow stronger in a foggy mind and an inactive body. So use the questions in Steps 1 and 6 to move out of your worries and into resolution.

8. Don’t Let Ideals Ruin Things

A common mistake people make when making a shift in their attitudes is that they think that they have be perfect and do things perfectly all the time. This traps them from being positive.

Changing to a positive attitude can be gradual. While you may slip and stumble, continuing this way over time will strengthen your positive viewpoint more and more.

But if you set an inhuman standard for yourself and think you have to go from being a pessimist to always being an optimist, then you may find it hard to live up to that. And so you may feel like a failure. You get angry with yourself. And you may even give up on changing this habit and fall back into negative thinking.

So instead, focus on gradual change. If you are optimistic 40% of the time right now, try to improve this to being optimistic 60% of the time. Then, increase that to 80% when you are used to the new standard, then subsequently 100% if you can.

This focus on gradual improvement is far more sustainable and likely to bring long-term success than trying to reach an inhuman standard grounded in perfection.

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9. Finally, a Reminder to Help You to Not Give Up

I would like to end this article with a simple but powerful and timeless thought that comforted and encouraged me to continue on when things looked bleak.

That thought is: It is always darkest before the dawn.

This thought has helped me to hold on and keep going when my social skills and dating life was just plain bad. It has helped me to continue on in my online business when things looked like they would never pick up. It has helped me to put one foot over another even when things looked dark.

I have found this thought to be very true. Why? Because when things seemed to be at the lowest for my blog, business, dating life or life in general, something positive would always happened. That’s probably because being at a low point forced me to change how I did things.

But maybe also because life has a way of evening itself out when I go on. By taking action rather than give up, something good will always happens.

Seeing this thought live itself out has strengthened my belief in staying optimistic, in taking action and to keep going even when going through rough patches.

Re-syndicated 9 Simple Habits to Stay Positive in Life | Personal Excellence

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Featured photo credit: Allie Smith via unsplash.com

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