Sunk Cost Fallacy: What It Is And How It Compounds Problems
Fallacies are cognitive biases through which reality is veiledly disfigured, giving an appearance of plausibility to what is essentially uncertain or directly false. Almost all people have incurred them at some point, and/or have been “victims” of someone else’s, at least at one point in their life.
Most fallacies lead to deception to third parties, but there are also those that only distort the truth of the person who utters them, to the point that they impair his or her ability to make correct decisions in a problematic situation.
In this article we will delve into the sunk cost or Concorde fallacy (in homage to a plane created by the French government and which entailed enormous losses for this country), which has been the subject of much research because of how it can affect the fate of those who fall into its networks.
The Sunk Cost Fallacy It is, perhaps, one of the most common cognitive biases in the life of every human being. It is also known that, on multiple occasions, it has very serious consequences for those who incur it (as well as for their immediate environment). The convergence between its frequency and its potential harm make it an object of great interest for psychology, logic and even economics. And, even if we insist on believing otherwise, sometimes our decisions are far from being rational and complete.
A sunk cost is understood to be any investment that, due to objective circumstances, appears to be absolutely irrecoverable. Such an investment can be understood in temporal terms, as a significant outlay or as the satisfaction of what was once perceived as a basic need for happiness and/or self-realization. Thus, this concept includes any relevant effort from the past for which any expectation of return, cushioning or compensation has been diluted.
It is also known that the appreciation one has for what one invested in (it could be a work project, a relationship, etc.) is directly proportional to the amount of personal effort it required, in terms of emotional attachment. or outcome expectations. And at the same time, it is well known that The greater the attachment we have to anything, the more difficult it is to let go of it or abandon efforts to keep it afloat. Everything reviewed here is the foundation on which the sunk cost fallacy is built.
The main problem with this fallacy lies in the decision-making processes in which that person or project to which our past efforts, sometimes titanic and constant, are involved, is involved. Although there is no option to recover the investment they involved, We continue to keep the past in mind when assuming alternatives for change for the present ; since we usually refuse to lose everything that once cost us, or to liquidate the expectations that once motivated us to undertake what we would leave behind today.
With the incorporation of the loss, located in the past and completely irrecoverable, the decision-making process is conditioned by elements foreign to rationality (understood as the weighed analysis of the potential benefits and drawbacks both in the short and long term). ). In this way, options would not be chosen aimed at obtaining positive things (a better job, a relationship that brings us more happiness or simply the cessation of some economic hemorrhage), but instead The ultimate goal will be to avoid something for which it is certainly already too late.
The consequences of this fallacy can be truly dramatic, and are often at the root of personal failures and economic disasters. In fact, it is a concept that the economy has rescued to understand what lies dormant after the losses of its clients’ assets. Below we will see how it can lead people to act, and why it usually leads to situations that only deepen the problem.
What is this fallacy and how does it work?
In summary, the sunk cost fallacy is a cognitive bias that consists of provide value to a relevant personal investment from the past, and clearly irrecoverable, to keep a project afloat whose expectations are very discouraging. In this way, the effort would be maintained in the expectation of recovering what was given (money, time, etc.) without realizing that it is really something that will never return. In short, a refusal to give in to a threatening reality due to the fear that accepting the loss inspires us, and that can end up seriously worsening the situation.
Most of us have experienced firsthand the difficulty of giving up, of giving up on something even though we are aware that it is a lost cause. It is, in fact, about a harmful way of insisting ; that harbors the hope that a stroke of luck (or hitting the key) will diametrically change the situation and we will be able to right the course in an ocean whose waves threaten to sink us beneath its unfathomable depths.
The sunk cost fallacy is a bias that prevents us from letting go of the past because of the emotional attachment we forge with it, even though it has no resonance for the present. It often involves maintaining all efforts toward something that no longer brings us happiness. This happens because we become victims of an irresolvable dissonance: “I have invested a lot, everything I had, in this… I can’t abandon it now, because it hasn’t brought me anything good yet.”
Some mental health problems are formed around this fallacy, especially pathological gambling. In these cases, the behaviors that are carried out (gambling, games on a slot machine, etc.) generate losses and interpersonal conflicts of immeasurable magnitude, but the affected person maintains the habit because he has already “lost too much” and cannot allow them to “abandon their effort” without first having recovered at least a little of their investment. Obviously, The consequence is that the problem becomes increasingly worse deploying what is known as “hunting” (asking money from acquaintances with the aim of recovering from losses).
Furthermore, it has been described that this fallacy also affects us when the person making the efforts is an individual whom we admire or whom we love. Thus, if a person whom we hold in high esteem asks us for something and we don’t feel like it, most of us will tend to give in and end up doing it (in compensation for someone else’s investment, not our own). This is a familiar experience for a very relevant percentage of the general population, and it represents the extension of this sunk cost fallacy to social dimensions.
Some examples
In order to clarify how this fallacy or bias is expressed, we will see some concrete examples of different forms that it can take according to what has been previously referred to.
1. A ruined project
Felipe was young, and as such he burned with the desire to carve with his own hands a future in which to live fully. For many years he combined a (weekend) job with his training, saving as much as possible to build his own business one day. When he had just placed his hands on that diploma that he had worked so hard to obtain, he was already fantasizing about the life he had always wanted for himself, building castles in the air about what his days would be like from then on.
Unfortunately, Felipe was still unaware that despite so much hope, His project was going to be a failure that would lead him to lose everything he had saved during his youth. More than a year had passed, and his restaurant’s losses were increasing wildly, with no indication that the situation would change. Despite this, and given that he had invested too much in the opening, he decided to ask some people he trusted for money in the hope of making a comeback in the future.
2. Where are we going?
Vanessa and Miguel had been together for ten years, and in that time they had gone through all kinds of situations. Lying on a cold bed, appreciating the darkness that crept across the ceiling of the room, she meditated on her life with him. The first years were perhaps the most difficult, as her family did not accept the man she had chosen as her partner, and she fought against all odds to stay by her side in the worst of all possible scenarios. . Despite this, she remembers that period as an adventure in which she learned a lot about what life truly was.
The sound of crickets reached his ears, in that night that seemed eternal. And it is that I didn’t love him anymore, in fact I hadn’t felt the same for at least five years. He hoped that the morning light would bring with it the strength he needed to articulate the words that would take them to the end of their shared path. She no longer made him happy, but he refused to believe that a story like his would die in such a mundane and sad way. They had spent so much time together… she was a mass of doubts. One more night, like so many others before.
3. A bad looking cake
It was a Sunday afternoon. Just like other times in the past, Grandma Carlota brought what was once a fantastic carrot cake for dessert. Not in vain, she was a woman who had become well known for a recipe whose birth dated back to times that only she could remember. And the years were beginning to accumulate in her snowy hair, and she was unfortunately entering the winter of her life. But at that moment, under the light of a dying autumn afternoon, the family ritual was going to begin. It was the only important thing.
The smile on his face was just as it had always been, as was the theatrical gesture with which he showed off his excellent creation. On that day, however, what everyone was waiting for with excessive expectation became the most unexpected of horrors: that was not grandmother’s cake, but a shapeless mass that looked dangerous to health, which emitted a strange smell that He immediately made the dog escape with pitiful sobs of panic.
There was silence. Everyone looked at each other first, and at the grandmother right after, with her smile on her face. The usual smile. “That looks good!” someone somewhere lied. With trembling hands and a heavy heart, fearing that this was “poisonous”, everyone gobbled down the usual generous portion. And the woman, who always gave everything and had gotten up early to lovingly prepare the food, deserved it a lot.
