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The Sunk Cost Fallacy: What is it and why does it happen?
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- čas přidán 12. 08. 2024
- Much of our decision making is focused on how and where to invest our time, money, and effort. The sunk cost fallacy is one of the more frequent delusions which clouds our judgment.
This video explores what sunk costs are, why they happen, and what we might do about them.
The message is not quit everything. The message is: ignore sunk costs. Feel better about quitting a book halfway through if you aren't enjoying it.
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Video + Sound + Script by Alex Belser.
All inquiries: alex@belseralex.com
Freelance work at bels.works/
Instagram: / belseralex
If you enjoyed this, you might also enjoy the following links on sunk costs:
A dope podcast by Seth Godin on Sunk Costs: www.akimbo.me/blog/s-2-e-13-i...
An OG study on sunk costs by Hal Arkes and Catherine Blumer: pdfs.semanticscholar.org/e456...
A nice little article from Richard Thaler: review.chicagobooth.edu/behavi...
I think the simplest way to describe the Sunk Cost Fallacy is, "We must continue to pursue the Very Bad Idea or else our pursuit of the Very Bad Idea up to this point will have been in vain."
It's an emotional investment, not a rational one. Politicians use it to justify "forever wars" all the time.
Agreed
A simplication of this is when you find yourself saying "i am in to deep to quit"
too
Accountants often have difficulty wrapping their heads around this idea. *Somebody* has to be held to account for past spending and effort, they argue. But ignoring sunk costs is 100% rational.
Yeah. As an accountant, the concept of 'waste' and 'loss' cannot be just simply set aside, specially on management-related interest. Well, accountants merely records and organize, but cost management is still quite a KPI for some. So, better make use of assets that are already procured or push-through undergoing projects contracted with a business partner, as long things are within the base objectives and budget targets.
Nice to understand this type of behavior, makes me so proud for leaving all of those toxic situations that I’ve faced.
recognizing and leaving someone or something that is not serving you well can be tricky sometimes, I was even called a quitter for doing so.
Absolutely regret nothing and I’m happy that I did.
I wish I'd seen this video around the time I started questioning whether I should continue with my college education.
Now I'm over a hundred thousand dollars in debt and don't work in my field, when I could have been thirty thousand dollars in debt and not working in my field.
One hack with relationship sunk costs is to treat every date like the first date. If you wouldn't go on a first date with someone you don't go on the 100th either.
Realizing that I missed this video for a week is the saddest part of my week.
Honestly I’m very glad my teacher recommended this channel this makes everything much easier to understand
Glad to hear it helped!
I have invested so much,
that I can quit.
When my health is in question, its so easy for me to quit that it will take not a second to make my decision.
I have finally learned to avoid them. Make the decision to move forward not look back…that was huge for me
I think it's a mistake to classify sunk cost fallacy as a complete fallacy. After all, the instinct to salvage a bad situation evolved as a survival mechanism so it must have served a purpose. Just like any other instinct, it can be to your benefit or it can be to your own detriment. We shouldn't pay too much attention to it but we shouldn't also completely dismiss it either
You’re describing the fallacy fallacy! Which also applies in this case! Yes if you hate the food you got from a restaurant but you’re hungry and everywhere else is closed, eating it is better than nothing.
@@The_g_string_lover I really disagree with the mentality and the way people just invent a brand new logical fallacy and call it a day because the God of rationality can never be wrong. The decision to categorize an argument as a fallacy is not as rational as you might think, and it is very much influenced by your worldview and your personal beliefs of what rationality and truth should be or look like. It’s a purely qualitative way of determining truth, and completely overlooks other ways of determining truth such as statistical analysis.
Yes, that's what I thought too. Seeing things through has a hidden value as well. If you see the bad movie until the end, maybe you get to spend time laughing at it with your friend in a warm, nice movie theatre instead of both of you going home. And, you often risk looking bad if you flit from job to job, or switch school programs three times a year. Sometimes, things also turn around after a difficult beginning. Maybe you thought you hate your school but it just took some time to get the hang of it. It doesn't make _that_ much difference if you wasted two months or four months trying out something. At least you'll know you gave it a fair shot.
@@Ivan-td7kb I disagree. It should be classified as a fallacy because it is. Fallacies aren't "invented". They're discovered. If an argument goes against literal logic and reasonableness, then it should be labeled as going against logic and reasonableness. Which is what labeling something as fallacy is. Reason or truth has no barring on what one thinks it should be. It just is. It's our job to discover it. We don't invent the rules of logic and reason. And if you would want to disprove them, then you would have to use the rules of logic and reasoning to do so, thus making it circular. But I'm getting off topic. Ahem.. Either something is a fallacy or it isn't. I believe that sunk cost is a fallacy.
The sunk cost fallacy is just using a sunk cost to justify a decision. That's it. What you guys are doing is lumping other stuff into it that's not a part of it. If you say you want to stay through a bad movie because you have hopes of it getting better, that's not the sunk cost argument. You're not arguing from sunk time or money. You're arguing from hope of it getting better. Therefore, it's not a sunk cost fallacy. If you said you want to sit through a movie only because you already spent time or money on it then that would make it the fallacy. If you have knowledge or belief of something not getting better or not having a pleasant outcome, and you only argue from sunk cost, then it's the fallacy.
literally came here to figure out wtf technoblade was talking about
Came here to figure out what Wilbur said to tubbo xD
THE SUNK COST FALLACY JUST WOULDN'T ALLOW IT.
RIP Techno
I'm literally here cus my teacher is forcing us to watch this lmao
@@fighter_force7958 This aged well
This means alot
The most thought 💭
Provoking concept I've came across this week.
except its usually the sunk cost fallacy that pushes harder to do things Ill always be proud of.
I think about this, too-it's behavioral quirks like the sunk cost fallacy that keep us doing certain things we might otherwise quit. I don't think these fallacies and behavioral biases we fall into are always a good//bad thing-they're often just how our brains work and understanding that can help us achieve our goals. When we understand how the sunk cost fallacy works, we can work with our nature rather than against it. We can use that expensive gym membership to motivate us to keep going to the gym or to continue some action. Thanks for watching and sharing your thoughts, Kesavan!
Thanx for the video. The problem is when you simply doubt about what to do when you already had (lost) costs. The doubt is the key to resolve, if it is present it's already a sign. You need to comprehend if you are going on because of what have already invested (and you can't allow to accept losses (because losses are things of "loosers")) or if you are proceeding because you really like what are you going to do. Passion or good feeling are the key. The first case gives you a sense of being trapped (and the doubt about sunken costs is a sign) and the second gives you a energy to do better the next time, to be really an ace in whatever you are going to do. Need to hear/comprehend that feeling in your chest. Imagine for a second to not have lost anything, will you invest now in that thing? If the answer is "YES" then go on. We need also a good mental equilibrium to choose objectives that are reachable and not fool ourself with something impossible.
The next and more important question is: HOW do we ignore the sunk cost? It's clearly something ingrained into our brains. Whether it has an evolutionary function or not. A lot of tips, advice, etc. cover why you should do A or not do B. But what's often ignored is the very important HOW.
So, thanks for the info... but how do we stop caring about the sunk cost?
Example. Zane bought 10 games on sales last year. He only played 3. About 5 unplayed games he actually think he'll want to play because they might be fun, the last 2 he feels like he needs to play , because otherwise it would have been a waste of money, even on sale. In the meantime, he actually would rather replay other games he already had.
If we ignore sunk cost, then Zane should play the games he wants to play - and if replaying games he knows he loves is the thing he wants to do the most, then that would be the right thing to do. But Zane can't ignore the sunk cost. He knows he should. But indeed, it feels like a waste to not at least try them all out x hours, even if he doesn't finish them.
Ok before I ramble on with the example... how do we make Zane ignore the sunk cost. Psychologically, that can be very very tough. I myself struggle with this all the time (not just with games).
Another question I have that I thought of while writing the example is: if someone gives you a present like a book or a game and you don't feel like reading/playing it, but it was a gift, so you feel obligated to, is that also a form of sunk cost fallacy, even if it's someone else's cost?
it has to do with our subconscious mind or heart more like we programming ourselves unknowingly because what the heart receives regularly when unchecked becomes who we are . so we need to :
Recognize the fallacy- The first step to overcoming the sunk cost fallacy is to recognize that you are making a decision based on your past investments, rather than on the present and future costs and benefits.
Focus on the future: When making a decision, focus on the future costs and benefits, rather than on the past investments. Ask yourself: "Would I make this decision if I were starting from scratch?"
Don't be afraid to cut your losses: If you realize that you are no longer getting what you want out of an endeavor, don't be afraid to cut your losses and walk away.
Learn from your mistakes: Every time you make a decision based on the sunk cost fallacy, learn from it. This will help you make better decisions in the future.
Thank you for for this excellent explanation ✌
Very good explanation with graphics. Thanks!
Thank you for explaining this amazingly.
0:58 what if the climax ends up really exciting or some other surprise at the end that significantly raises the value of what u spent in the first place? I am sure that would happen a lot in other situations, if not movies. What do I do then?? For example, what about an expensive gym membership? I feel terrible while exercising, and I know I will be tired. Then should I accept my loss and go away??
You bring up some interesting points. I think that the sunk cost fallacy is maybe not as clear cut as: quit at the first sign of discomfort or lack of enjoyment. I think the whole idea is to work with our nature, rather than against it. We can use the sunk cost fallacy in ways consistent with our life goals. Perhaps we can use sunk costs to compel us to stick something out (i.e. continuing a workout, to attend the gym, finish a book, or see a movie through). But when the sunk cost fallacy becomes harmful to us is when we do things solely because we've already outlaid costs (be them monetary or physical or psychological) rather than when thinking about what we want from an experience. What do you think?
@@intermittentdiversion hmm that's interesting. Thanks for explaining :)
If you leave a movie you don't really care to keep watching, let the theater manager know and they'll give you your money back. I've been to see quite a few movies I didn't care to keep watching. I always got my money back.
Really?
Not in my country
Wonderful ... amazing and clear
Glad you enjoyed it, Antonio!
Lol i was trying to explain this to my lil sister but she didn't understand and i was about to drop the idea to explain in middle but i would have done so much for nothing.
I was typing a comment to answer this but thought I'd erase it because I didn't have much to say but what the hell, I've come this far. Your sister is quite stupid
Thank you for explaining this, a youtuber (Technoblade) said this phrase in one of his videos and I didn’t really understand it so thank you (:
Thanks for watching-hope it helped!
And Wilbur also said it to tubbo. He explained what it means and why tubbo shouldn't give up on lmanburg. I can find the clip if you want to
Also when did techno say that phrase?
@@fighter_force7958 techno vs skeppy,potato war
@@karn7777_ THEY HAD A POTATO WAR?? when. I thought it ended with squidkid xD
learned a new thing!
Great content 👍
Glad you enjoyed!
Thanks you so much
thank you
Great CZcams content!
Thanks for watching!
i spent $500 on something i didn’t enjoy but kept using it because of this fallacy
Nice explanation bruh
Thanks for watching, Shivam!
I'll summerise the concept. It's called chasing your losses.
Gathering information to convince my nephew quitting fortnite and Roblox and moving on to other activities he likes rather than video games. Or at least quitting those 2 video games.
why do i feel like this analogy is from the book art of thinking clearly
Religious beliefs springs to mind on this one. It's highly likely jesus didnt turn water into wine, raise the dead but I've spent so long believing it ...... cognitive dissonance is a massive one for the religious but they struggle to see it
I never wait in line and leave within 5 minutes if the movies shit. Am I broken?
Sounds like Barcelona’s Dembele.
Such a valuable lesson, well done. Thanks!
me when I'm trying to beat a game and find a short cut
Movie ticket is a bad example. I'm not going to be forced to spend another $10 halfway through the movie.
Came here because I just found out mormonism is false been a faithful member for 40 years 😢
Philosophy of letting go then?
My life feels like a sunk cost fallacy
Is there anything as a "sunk benefit" and does it create fallacies?
Stock investing.
Which software do use to make these videos?
❤️
But Lalaland sucked but the ending made it so worth it.
Runescape
B-R-E-X-I-T
I have never seen a movie that wasnt worth finishing.
This is basicly gacha game strategy
Will the West wake up?
Ukraine ! Duh !
You say sunk cost exist but give no research or otherwise data to say why, so I guess this video just proves sunk cost exist because you sunk to much cost into something you had little chance of ever understanding or explaining, so you made a video anyway...