Quitting 3: Avoiding the Sunk Cost Fallacy

"Once I start a movie, I always finish it, even if I don't like it."

"The book really bogged down in the middle and kept getting worse, but I just couldn't bring myself to put it down because I always finish reading something I've started."

"The project wasn't going anywhere. In fact, things were probably getting worse, but I just couldn't quit given the time and energy I had already invested."

Ever heard someone say one of the statements above? Ever said something like it yourself? How many of us have been counseled and coached to finish what we started, even though all the signs aligned to suggest we were going nowhere but downhill? 

 Conventional wisdom is often expressed in the following ways: 

• Join a team--finish the season. 
• Take on a project--see it through to conclusion. 
• Help yourself to the buffet--finish what you put on your plate. 
• Make an investment in the stock market--hang in for the long haul.                           

The basic rationale  for continuing often sounds something like this: "I've already invested so much in this endeavor that I can't quit, turn back, waiver, or reconsider."

In other words, we base our decision to continue in a particular direction based on what we've already invested--as if we could recoup those resources--rather than on what we will lose if we continue a course of action.

In The Art of Thinking Clearly, Rolf Dobelli summarizes nearly 100 ways human beings embrace irrational thought to their own detriment. One of these ways involves something known as the "sunk cost fallacy," also known as the "Concord effect." Basically this involves the idea that we have a much more difficult time letting go of something in which we've invested a great deal of time, energy, love, or money because we believe "if we stop now it will all be for nothing." It's as if we believe we can somehow recover what we have lost if we continue. The problem is that future effort in a direction going nowhere is even less likely to produce a return on our investment, let alone recover what we've lost.

Dobelli acknowledges there are times when staying the course, is the right thing to do. The decision to continue, though, should be based on the likelihood of reward for future efforts, not on what we've already invested. He cites a number of examples where the "sunk cost fallacy" had a disastrous effect (e.g., the continuation of the Viet Nam War, the failure of the Concord airplane, and any number of ad campaigns or stock market investments).

The decisions you are making likely have much less gravity than a super-sonic airplane or a war, but they are important to you. The next time you're watching a movie that's a yawner, reading a book with a plot going nowhere, or involved in a project with a less than promising outcome, you might just call it quits. While you cannot regain what you've already invested, you can avoid wasting future precious resources on something showing little promise.

Thinking it's time to let go of a few more things,

Dr. Jennifer Baker