Summary

The article discusses the sunken cost fallacy, a common decision-making error where individuals continue investing in a losing situation due to previously invested resources.

Abstract

The article titled "Stop Making This One Huge Decision-Making Mistake" delves into the concept of the sunken cost fallacy, explaining how it leads people to make poor decisions by continuing to invest in a losing situation because they've already spent resources on it. The author provides three reflective questions to help individuals avoid this trap: considering alternatives, imagining the initial investment was made by magic, and projecting 20 years into the future to assess potential regrets. These questions aim to clarify decision-making by detaching from the emotional weight of past investments and focusing on the present and future outcomes.

Opinions

The author suggests that the human brain is naturally inclined to commit the sunken cost fallacy, which is detrimental to making rational decisions.
Admitting to a poor initial investment is often more painful than continuing to waste resources, which perpetuates the fallacy.
By asking oneself about alternatives, one can make a more informed decision about whether to continue on the current path or change course.
The "magic" question is posed to help individuals disregard the initial investment's influence on their current decision-making process.
Imagining a conversation with one's future self is recommended as a method to gain perspective and avoid regrets based on past investments.
The article emphasizes the importance of clarity in decision-making and suggests that distance—both temporal and emotional—can provide a clearer view of one's situation.
The author encourages readers to engage with the content by leaving comments and offers further reading on decision-making and the sunken costs fallacy.

Stop Making This One Huge Decision-Making Mistake

This is how to never make it again

Photo by Adventures ofmaldives on Unsplash

Have you ever found yourself going to the cinema, you have already paid for the ticket, finding out halfway that the movie utterly sucks? What do you do now, are you staying or leaving?

If you chose to stay because you have paid for the ticket already, then congratulations, you are a victim of the sunken cost fallacy.

This fallacy is the mistake people often make when deciding on further action. When you have spent (a lot of) resources already, this makes you more likely to continue to spend even more. Even when it is clear that quitting and changing course is the better option, people ought to not change course.

When people already have wasted their resources, often admitting this is more painful than continuing to waste even more resources.

Even though this seems rather ridiculous, the human brain is prone to making this error. The solution to prevent you from making this mistake is to arm yourself with questions. You can use these to protect yourself whenever you are in such a situation.

Questions to ask yourself when you suspect the sunken cost fallacy is at work:

Question #1: What are my alternatives?

By getting a clear image of what your other options are, you set yourself up to make up the balance. When you see the alternatives, it is easier to opt-out of your current path just because now have created other options to choose from.

When the other options seem worse than your current path and you decide to continue in your current lane, you will have more confidence that this is the right choice for you.

When one of the other options seems better than your current one, consider changing course.

Question #2: Would I continue down this path if I would have gotten here by magic?

Let’s again take the example of the cinema. If you can somehow take away the initial investment, let’s say by imagining you got the tickets for free, would you then still stay at this awful movie?

If you would leave the movie if the tickets would have been free, you should also leave if you paid for them. The initial costs have already been paid and are irrelevant to your decision at this moment.

Another example:

You have a job and you are not sure whether you should change careers or not. Being in this job for over 5 years makes it difficult to ignore all the time and effort you have already put in.

Now imagine you got to this point in your career by magic, for example by switching places and related working experience with someone else. Would you then still decide to stay, or would you then choose a different career path?

The price you paid has already been paid and should not continue to have an impact on your decision-making in the present. The best thing you can do now is to make a better choice for the future.

Question #3: Looking back from 20 years into the future, will I regret to have continued going down this path?

One of the best ways to help yourself to make a good decision when you feel too invested to make a clear judgment is to create distance.

Creating distance is like zooming out, getting a broader picture. From a distance, it is easier to have a clear understanding of the situation at hand.

To do this, imagine stepping into an imaginary time machine and set out to travel 20 years into the future. Once you arrive in the future, go to your older self and have an honest conversation with yourself. Ask:

Was it really worth it to continue down this path, just because I had invested so much already?
What do you regret in this situation: not having had the courage to have changed lanes or not having pushed through?

The three techniques mentioned above rely on principles of creating clarity.

By creating distance you are better able to see the bigger picture.

“A story always sounds clear enough at a distance, but the nearer you get to the scene of events the vaguer it becomes.” — George Orwell

Thanks for reading my article. If you have any feedback or want to share your thoughts, please make sure to leave a comment! If you are interested in better decision making, check out this post.

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For more information on the sunken costs fallacy, check out this Wikipedia page.