The Sunk Cost Fallacy and How It Influences Our Decisions

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The Sunk Cost Fallacy and How It Influences Our Decisions<br>What makes us stay in a job we don't like, for instance?

Ali Almossawi<br>Jan 11, 2024

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Narrated + Video: The Sunk Cost Fallacy and How It Influences Our Decisions<br>Ali Almossawi<br>January 28, 2024

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Issue No. 13<br>A sunk cost is the price you’ve already paid for something, in terms of time, money, or effort. It’s in the past, it’s irrecoverable. An opportunity cost is the price you’re hypothetically paying for not doing something you could be doing , but aren’t. Likely because you’re bogged down with something else that’s taking up your time, money, or effort. This issue is about the opportunities we lose out on when we’re hung up on the past.

Once upon a time, it hit me that Franz Kafka was by day an insurance officer. Sitting behind a desk, stamping policies. Exposed to all the mundane details of an office job. Working on PowerPoint presentations, probably. Slacking off on Slack. Hanging out by the water cooler, talking someone’s ear off about salesmen and insects for the third time that week. Yeah, that’s all really interesting, Franz, but, umm … I’ve got a meeting I need to run to.<br>And then the years went by and I learned about other writers and their day jobs. T.S. Eliot was a banker. Wallace Stevens, the Pulitzer prize winner, was a corporate executive. Chekhov was a doctor. Coetzee was a programmer.<br>Coetzee eventually left his day job at IBM to “drift for a while”. And he ended up doing quite well. I don’t know enough about the others to know whether they enjoyed their jobs. Assuming some did, and some didn’t, a job is one of those things where the longer a person stays in one, the harder it can be to leave it. You might realize at some point that the rational thing to do is quit, but still, the days go by and there you still are.<br>Given it’s the start of a new year and an apposite time to consider new beginnings, I thought it useful to cover one of the reasons why we might do a thing like stay in a job we don’t like.<br>There’s a type of irrational behavior known as the sunk cost fallacy , which is a tendency to continue some endeavor for no other reason than because we’ve already invested a significant amount of our time, money, or effort into it. That prior investment we made—once upon a time—motivates this now current decision we’re making to continue.1<br>The sunk cost fallacy in everyday life

Jobs. A job you once loved has turned uninspiring, soul-crushing. But you’ve invested years into getting good at it, you’ve sacrificed all that time away from your family, years to finally get that promotion, all that tacit knowledge that makes you a person of stature at the office and in social gatherings. What a waste it would be to walk away from it all.<br>Identity. An identity you’ve forged over a lifetime around some ideology is in need of a reset due to some introspection you’ve done. But you have social circles built around that identity, or you’re a public figure with followers who hang onto your every word. Will you tell them you were wrong all this time and that you’re now moving in a new direction? What a waste that would be, and what a hit to one’s ego.<br>Replacing an old car. You have a beat-up car that you have to take to the shop and get fixed every few weeks. A friend tells you to buy a new car. That you’ve probably spent thousands on patching your car over the past decade. You respond, “But I’ve already put so much money into it.” It would be a waste to let go of it now.<br>Driving. You’re stuck in traffic. It’s bumper to bumper, but you’re inching forward every few minutes. You notice that a few cars are breaking out of the lane and taking some other route. You want to follow suit—they seem to know where they’re going—but you’ve already invested an hour inching forward in this current lane. You hate the thought of losing all that sweat you put in if you leave now. 2<br>Finishing a book or TV show. You’re halfway through an impenetrable book. You can’t, for the life you, understand what on earth is going on. You know you should stop, but since you’ve spent heaven knows how many nights trudging through, you tell yourself to get through the rest of it and see if things get better.<br>Food. You’ve eaten three-quarters of the food on your plate. You’re stuffed. A helpful adult at the table asks you to lick your plate clean. What a waste it would be to not eat the rest of that food.<br>Fixing a bad product. You’ve inherited a software/hardware product that suffers from what engineers call “technical debt”, wherein a series of bad early decisions led to myopic short-term fixes that are now causing a longterm maintainability nightmare. You propose recreating the product from scratch, but are told what a waste it would be to throw decades of work and money away at this late stage.<br>Relationships. A relationship isn’t working. But you’ve poured...