Wednesday, June 1, 2011

That sinking feeling

A young man felt that he couldn't break up with his girlfriend despite the fact that she'd cheated on him and stolen $1500 from his father because "I've spent too much time and energy in to this relationship."

We urged him to consider the current and future situation, but the bottom line for him was that because he'd put in so much time, effort and money in the past, he couldn't let it go now, despite the fact that what he had now, was bad. 

This is the sunk cost fallacy. Thinking that the amount you have invested in the past somehow justifies putting up with the current (bad) situation.

I's like refusing to leave your burning house because you've spent a lot of time and energy on decorating it and you have a lot of memories there. 

It's like continuing to invest in a company that's gone bankrupt (and the CEO has gone to jail for fraud) because you originally invested $10K in it and you don't want that $10K to be for nothing.

It's like continuing to eat an apple that is riddled with worms because you spent 50c to pay for the apple and you don't want to feel like you've wasted 50c.

I don't understand this reasoning at all. Why throw good after bad? I understand not being able to see that you're in a sunk cost situation, but when it's pointed out, to choose to stay in it... it beggars belief.

Or maybe this song expresses my point of view better.

You gotta know when to hold 'em
Know when to fold 'em
Know when to walk away
Know when to run

The fact that muppets are involved just makes it all that much neater.