Sunk Cost Fallacy

Sounds a bit complicated, right?

After you watch the video, you’ll realize it’s actually quite simple and surprisingly common. A second after that, it’ll dawn on you that YOU have fallen to the “Sunk Cost Fallacy.”

I am no different. All my life, I thought my decisions were based on investments for my future. Some of them, maybe. But the majority were based on what I have already “spent.”

Here’s a simple way to get a grip on the idea:

When you lose something permanently, it hurts. The drive to mitigate this negative emotion leads to strange behaviors. Have you ever gone to see a movie only to realize within 15 minutes or so you are watching one of the worst films ever made, but you sat through it anyway? You didn’t want to waste the money, so you slid back in your chair and suffered. Maybe you once bought non-refundable tickets to a concert, and when the night arrived you felt sick, or tired, or hung over. Perhaps something more appealing was happening at the same time. You still went, even though you didn’t want to, in order to justify spending money you knew you could never get back. What about that time you made it back home with a bag of tacos, and after the first bite you suspected they might have been filled with salsa-infused dog food, but you ate them anyway not wanting to waste both money and food? If you’ve experienced a version of any of these, congratulations, you fell victim to the sunk cost fallacy.

You Are Not So Smart

I am currently in a job I don’t like, but don’t hate either. Let’s just say I would prefer an occupation where I can hold a camera 24/7 or experience neck ache at Adobe Photoshop/Illustrator. But I’ve already “invested” four months into this (not exactly a lifetime, I know) and as much as I would like to change my career path, I’d feel kinda wasteful throwing the four months I already gave. See? Sunk cost fallacy victim right here.

And the sunk cost fallacy then means making a choice not based on what outcome you think is going to be the best going forward but instead based on a desire not to see your past investment go to waste.

Julia Galef

Questions I’m gonna crack my head on for the rest of the day… week… year…

  1. Should I risk making my future choices based on what my preferred outcomes are while seeing my past investments disappear?
  2. Is holding on to past investments really that bad? Or just being practical?

More on this topic:


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