I read Essentialism by Greg McKeown and came across a story. A man, in an effort to win an Xbox Kinnect, spend his whole life savings ($2,600) at a carnival game! The more he spent, the more determined you are to “win it back”. How insane is that? Sadly, we do this all the time. Have you ever paid for a book and forced yourself to read it even though it stunk? How about sat through a bad movie because you paid for the ticket? Or that car that is a money pit, but you don’t want to sell because you’ve already spent so much?
Any decision you make, there is the possibility you continue to do as you decided, just because you’d decided it.
Sunk cost bias is the tendency to continue to invest time, money, or energy into an investment we know is a losing proposition simply because we’ve already incurred a cost that cannot be recouped. (taken from Essentialism)
For years I have bought Oklahoma State season basketball tickets with my family. This year, I decided I wouldn’t do it, but was talked into by my parents and brother. Now, as the season has been a struggle and the losses have piled up, every game I’m left with the decision: do I want to go. This decision is clouded by the fact that I’ve spent the money on the tickets. If I don’t go, the money is wasted. So many times I find myself going just so the money gets “used”.
But the reality is, if I have something better to do, I should do that.
So, how can we avoid it.
Just being aware of the existence of it, you’re ahead of the game.
Also, be aware of your future goal. Does eating this horrible burger just because you bought it help you reach your 15 pound weight loss goal? Of course not. So cut the loss, only eat good food, and don’t make yourself fat on bad food.
That’s a simple example, but it can apply to much bigger things. If something isn’t enriching, or is wasting time you could use towards a better cause, use it in that direction. You only have 10,080 minutes in a week, 525,600 minutes in a year. If you spend 120 minutes watching a bad movie, that’s 120 less minutes you have to do something you’ll enjoy.
Make a list
Sometimes, the decisions aren’t as easy as walking out of the movie.
For those complex decisions, making a list to figure out the cost of continuing forward versus the cost of cutting your losses. By looking at the decision in a logical manner, versus the emotional manner of sunk cost bias, you’re allowing yourself to take the emotion out of the decision.
Also, pros and cons. A pro and con list allows you to step outside of the decision the same way as a cost analysis does. By analyzing the pros and cons of continuing or not continuing on the current path you’re able to create a visual for yourself. Many times this list by itself can help you reframe your decision making process.
Forget your image
I think a lot of this falls on our image. We think we don’t want to look like we made a mistake. Donald Trump, anyone? Dude cannot admit his mistakes.
By forgetting your image, you’re allowed a more clear mind to make decisions. So many people in life try and create an image and are crushed when that image is shattered. Life is much easier if you live transparently.
Athletes, politicians, everyone has an image. Have you noticed what happens when crisis hits? Many deny, deny, deny. Even when it doesn’t make sense anymore, they still deny. In today’s world, this denying creates a memory and actually attracts more attention. It makes the fall more spectacular. The ones that come out and admit? Most of the time, we forgive and forget. The story has less time in the news cycle, and less time to be burned into our memory.
I’ve never figured out why they still deny, but that’s another discussion. Applying this to our own lives, if we live transparently, admit our mistakes and move forward, people are most likely to forgive and forget. They’ll move forward with you. But create an image, and the fall can be spectacular.
Through this awareness you’re hopefully one step closer to making fewer bad decisions because of sunk cost. What are some ways you can quit making irrational decisions because of sunk costs you’ve already incurred?
O, and btw, should I go to that Oklahoma State game? Probably not… but let’s be real… I’m still going.