Why “Sunk Costs” still sink people?
It is quite common that people still make bad decisions because they cannot let go of “Sunk costs”.
I am the living example. I still feel very very bad due to my career set back this year. Sometimes, the feeling was so strong that it shows on my face and affects my efficiency in getting things done.
Another well-known scenario is as follows: if you bought a movie ticket to a bad movie, will you just leave half way?
I do not know about you, but I probably won’t…haha
So the problem here is why we just cannot let go of the “Sunk Costs” and move on, even though we know we should logically.
It would be lazy to just say “Knowing is oceans apart from doing” (I will do an entry on that later).
So I really thought about the “why”. And I now think there might be two reasons that are deeply linked to our nature as a human being.
1. Fear of losses
Compared to the same amount of gains, the emotions triggered by losses are twice as much.
That means the joy we get from gaining 1000 dollars is only half of the suffering we get from losing the same amount of money.
So people hate and fear losses.
“Sunk costs” are gone by definition.
But if we turn away from it, it would mean that it is really “lost” and becomes actual “losses”. This is obviously just some mental games. It is lost already.
2. Fear of being proven wrong
I struggled a bit between “Fear of being proven wrong” and “Fear of being wrong”.
I decided to use the former.
Maybe people are ok to be wrong and preferably correct themselves “quietly”. “Quietly” means that they do not even realize it themselves. This way, no explicit emotions are triggered.
However, “being proven wrong” represents a logical and conscious conclusion, which will trigger emotions.
So people are more afraid of “being proven wrong”.
And making a conscious decision to give up the “Sunk Costs” proves people wrong, even if that is the right decision to make for themselves.
These two “fears” are closely and deeply linked to our human nature. They are hard to defy and thus “Sunk Costs” are hard to let go.
However, there are ways in which we can maximize our chances of success.
1.Understand “Sunk Costs” are not costs
Costs are forward looking.
Costs are something you need to give up moving forward.
“Sunk Costs” were incurred in the past. We do not need to give up anything going forward.
So “Sunk Costs” are not costs.
To make the right decision, we need to consider the real costs, which leads us to the second point.
2.Consider the “Opportunity Costs”
“Opportunity Costs” are the real costs.
It is the value of the best alternative we have to give up by making a decision.
If we decide to join a company, we are giving up the growth and wealth brought to us by other companies;
If we decide to marry someone and spend the rest of our lives with him/her, we are giving up the companionship of anyone else in the world;
If we decide to watch a movie tonight, we are giving up the joy and influence of any other movies.
So this is what will make a meaningful distinction to our lives going forward.
Hope we all make as many good decisions in our lives!