The sunk cost fallacy
Picture from KB35 on Flickr.
Maybe everyone knows about this already (I suspect it’s Psychology 101, or Business 101), but I am going to share, and hope that it might prevent some poor soul out there from wasting years of their life, as I have. It’s actually Frankie Magazine time again, and I was reading another article by Eleanor Robertson in Issue 50, in which she is questioning why she hangs onto relics of past relationships (at this point you might be forgiven for thinking it sounds like your regular women’s rag, but it isn't). Then she mentions the Sunk Cost Fallacy and describes it thus: “basically it’s when you keep doing something that’s not making you happy, because you’re acutely aware of the huge investment you’ve already made.”
It seems I am a victim (or is it a perpetrator) of this incessantly. Here is another definition (from here):
Once an individual has invested a substantial amount of time or other resources in a given course of action, he seeks reasons to justify this investment.
The greater the investment, the harder it is to write it off.
Robert Sternberg, The Triarchic Mind: A New Theory of Human Intelligence
It’s entrenched in my ridiculous personality to be loyal to the death of certain kinds of human interactions, or persist in trying to salvage a thing, when it really ought to be obvious that the other party a) neither wants or cares about such loyalty or persistance b) has done nothing to earn it or made any sort of return on it, and that it’s time to cease input, which often takes a big metaphorical slap in the face (that would appear to be God saying, very loudly, ‘this is not for you Ali’). And I do think it’s partly explained by the sunk cost fallacy. I hang on when it’s plain there is never going to be a way or an opportunity for redemption of the situation, in the hope that somehow all the previous investment will work towards something good. Then, slap, and it's that time, finally, when you just need to draw a line under a thing, write ‘excessive waste of time and energy – loss irrecoverable!’ and cease “investing”. (I’m sounding all very economic about relationships with people, but I am sure you understand.)
At times I wish I could just bounce off the walls like some, as while I am sure such die-hard loyalty has a time and place, there are other times and places where the investment is neither appreciated or appreciating (to borrow the economic term), shouldn’t have been made in the first place, definitely shouldn’t have continued, and all I have done is run up my losses.
The trick, according to the article linked above, and one Kahneman, ‘is to avoid “the escalation of commitment to failing endeavors” and to “ignore the sunk costs of past investments when evaluating current opportunities.”’ Hmmm.