Sunk Cost Fallacy

There is a human tendency to stay with something after we have put a lot of time, energy, money etc. into it – even when it no longer makes sense.

After a significant amount of money is lost, some gamblers will stay the course only to increase their pain.

Some stock traders will watch stocks go down and down and won’t consider getting out hoping “the bottom is in” only to see it trek lower.

Owning a car that is a lemon is a trying experience. I’ve witnessed people paying month after month for repairs. It’s almost like they have accepted their lot and automatically, without thinking, keep dumping money into a POS.

There’s a time to cut your losses and run. Many people just can’t seem to find that point.

The Sunk Cost Fallacy (SCF) can be applied to so many parts of life: Education, careers, relationships, home ownership – it is a universal concept.

The fallacy also occurs with diet and exercise.

Throwing resources such as time and money at anything that continually makes you unhappy or does not give the desired result is SCF. In my opinion, settling is a variant of SCF. People settle for things in life because they are just not willing to take the risk to improve them.

There are reasons we all stay the course and don’t take the risks for something better. One reason is that many of us were taught that “quitters never win”. As Chris Young sang “Quit that team and you’ll be a quitter all your life”.

But quitting a bad behavior that is costing you is essential for success. If you’re an alcoholic and have a difficult relationship, it’s time to quit the alcohol not the relationship. Instead, many choose the alcohol, doubling down on their toxic behavior.

Calorie restrictive programs can be this way. People cut way back on intake only to see their metabolisms dip. which means they have to cut back further on calories to continue to lose. They double down on the diet even though they’re hungry and miss eating all the delicious foods they used to indulge in.

They stick with it – until they don’t.

And then, with their slowed down metabolism, they lapse and gain some weight back.

And that’s the thing with the Sunk Cost Fallacy – there is ALWAYS an end.

  • For the gambler, it’s his credit limit with the casino.
  • For stock market trader, it’s how much money there is to lose.
  • For lemon owner, eventually the clunker will end up at Gary’s U-Pullit.

It doesn’t HAVE to end this way. At any time along the journey one can step back, evaluate the situation with its risk and rewards, and make a change.

It takes a thoughtful, cognitive, reasoning mind to break the momentum of making the poor choice of sticking with something that is damaging. But it can be done.

Gamblers can walk. Traders can sell. Cars can be listed on Marketplace.

But what you can’t do is go back in time.

Look, you may decide after you take a step back and look at what you’re doing that you ARE on the right path. Just because something is difficult and you’ve invested a lot into it doesn’t mean it will remain that way or that it is bad. We all have to pay our dues.

But you have to step back. Just because you’ve invested a lot is not a good enough reason to stay with something.

My first few years at my engineering job were very trying but I’m glad I stuck with it. One of the biggest reasons I retired from the job I worked and liked for 27 years is because I just couldn’t believe that was all that God had planned for me.

Think about all the examples in the Bible where people had to make career changes: Noah, Abraham, David, Joseph, Moses, Jonah, Job, etc. Even Jesus was a carpenter. What if he said: “Thanks Father, but I’ve invested quite a bit of time learning to make sheds so I’d just like to stay with this if it’s OK.”

We can change. We have control. We have all the tools.

And if we don’t, that too is a choice.

If your diet and exercise plan doesn’t leave you satiated, rested, strong, and full of energy, find something else! It’s out there I promise you. We’ve helped hundreds of people find it!

Don’t eat even one more bad sub! Make the change.

Ron