The Mercury News
WWR Article Summary (tl;dr) New research explores our tendency to stay all in on a botched plan even when it flies in the face of rational decision making.
The Mercury News
Have you ever felt stuck in a relationship that went sour or trapped in a job that no longer rewards you but you just can’t seem to quit?
Meet the sunk cost effect. This is the same reason we have trouble getting rid of clothes we no longer wear or moving out of places we used to love that now drive us crazy (looking at you, Bay Area).
A new paper published in the journal Psychological Science explores our tendency to stay all in on a botched plan even when it flies in the face of rational decision making.
Why do we insist on throwing good money (or time) after bad?
“The sunk cost effect is the general tendency for people to continue an endeavor, or continue consuming or pursuing an option, if they’ve invested time or money or some resource in it,” Christopher Olivola, an assistant professor of marketing at Carnegie Mellon’s Tepper School of Business says. “That effect becomes a fallacy if it’s pushing you to do things that are making you unhappy or worse off.”
One of the reasons we get snared in this psychological trap may be because we hate experiencing regret and admitting that we messed up, experts suggest.
Sticking with the plan, even when it no longer works, is a way to avoid cognitive dissonance: the mental disconnect between paying for something and not getting the expected return on investment, says Olivola.
“After we commit, we humans tend to shackle ourselves to our own decisions,” as Smithsonian Magazine puts it.
The sunk cost fallacy might also be a self-defense mechanism, a way to reinforce our confidence in the effort we’ve already put in, basically, a way to save face with ourselves, as University of Minnesota neuroscientist Brian Sweis told Smithsonian.
Bad romance is an iconic example of “sunk cost” thinking. Sometimes people chain themselves to an unhappy relationship just because they’ve already wasted so much time on it. If they cut and run, they will have to face the failure.
“Romantic relationships are a classic one,” Olivola says. “The longer you’ve been together, the harder it is to break up.”
One of the most fascinating aspects of this tendency to stick with the plan, even when it’s a total bomb, is that it appears to happen in other species, such as mice and rats as the University of Minnesota has studied. Like us, they have a hard time walking away from something once they have invested too much time in it.
As Alex Kacelnik, a behavioral ecologist at the University of Oxford, told the Scientific American: “If you find that one species makes a systematically bad choice, you can argue it’s an accident of history. But if you find a very different species does the same thing, then, come on, there must be some reason why evolution doesn’t eliminate this form of behavior.”
Perhaps the most compelling reason to study the “sunk cost” phenomena is to be able to catch ourselves when we are unwittingly succumbing to it, despite our best interests.
It might help us let go of whatever is holding us back.
“What’s done is done,” as Olivola puts it. “There’s nothing you can do to regain money that’s lost, and pursuing something that makes you unhappy not only isn’t going to get your money back, but it’s also going to make you worse off. You’re just digging a deeper hole.”