Sunk Cost Fallacy: Can You Conquer The Tendency?
An illogical cognitive pattern is widespread in decision-making. When we have invested time, energy, or money on a project that is not yielding any return, nor likely to do so, we persist with the project in the fond hope that the project will turn around and achieve success.
Only it doesn't. This kind of response and behavior are common with gamblers.
"A gambler might call it chasing your losses. The British saying ‘don’t throw good money after bad’ captures a similar sentiment. Economists call it the sunk cost fallacy, and it’s ubiquitous," says a BBC story.
According to the story, "This is the logic that says 'I’ve sunk a lot of money into my old car. I can’t just scrap it now. I really should replace that faulty gearbox,'"
Even animals can show sunk-cost fallacy. A recent University of Minnesota study found mice and rats were just as likely as humans to make indiscreet decisions involving delays and rewards.
So how can we counter the tendency?
“We are all susceptible to these biases,” the BBC story quotes Dr. Jim Everett, a social psychologist and researcher at Leiden University, as saying. “But often, we can partially offset them by taking a step back and thinking through the alternatives.”
When pondering whether to continue with a course of action, he says, always ask yourself: "What would I gain or lose if I stuck with this option, and what would I gain or lose if I switched?"
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