Episode 66: The Sunk Cost Fallacy, Part 2 - Ensuring a Successful Future
Hello my friends. A couple of weeks ago we talked about the sunk cost fallacy. The more time and energy we put into a failing strategy, the more unwilling we are to give it up. That's the easiest definition. Remember the story from that episode of a friend building a house.
I said, well, what are you gonna do? You better come up with a plan B. You better figure out what your options are. Even if it means you lose a bit of money on this property, you'll still be better off. I got about that far and he said, no, no, it just has to work. I said, well, how are you gonna do that? I don't know.
We'll just have to make it work. What happened when my friend couldn't see the sunk cost fallacy taking place in his mind? He went bankrupt. Do you remember the story of the business group who suddenly realized they didn't actually have a viable product, but they kept pursuing it? That pursuit has persisted for years. Attempt after attempt to make it look like the emperor was wearing clothes while pouring huge amounts of money down the drain.
Do you remember the example of someone thinking they will become a famous singer, only to blow the audition? Do you remember me saying this? Suppose you sink years and years of time, effort, money, late nights, early mornings, blood, sweat, and tears into a relationship, and it becomes evident that the relationship is no longer viable.
Not long after that podcast aired, I got a question from a listener, who said something like, "yes, but how do you know? Where's the line and how do you decide? Couldn't staying the course actually be an act of courage?"
Good question. How do you decide whether or not to walk out on that job or that marriage or that dream of fame and fortune or any other thing?
First, let's examine some of the emotions involved. Why would anyone persist in something that wasn't going to work? And why are people so resistant to even the possibility that they are falling victim to a fallacy? Listen carefully and see if any of this sounds like you. Number one, embarrassment. If I realize I'm falling for a fallacy, I must simultaneously admit that I made a bad choice. That's embarrassing if my admission must be made not only to myself, but to others. That's much more embarrassing.
One response to embarrassment is to pretend it never happened. Even that is false and will only perpetuate the embarrassment. One Study done years ago showed that soldiers in Vietnam would do horrendous things, things they thought they would never do, to avoid being embarrassed or feeling like they didn't belong.
Never underestimate. The power of embarrassment. Number two, pride. Most of us at one time or another are a bit prideful. We want to be seen a certain way. We may feel that we're in competition for the attention or admiration of others. In that case, we dare not course correct too dramatically, or we or others may see us as failures.
Many people are surprised to realize that they would do almost anything to be seen as successful, even seen as better than someone else. We trumpet our successes and hide our failures, but when our failures are exposed to us, instead of realizing that they might teach us, we usually trumpet our successes more loudly to convince others, but mostly ourselves, that we are capable.
Number three, fear. Realizing that you may lose your home, your job, or your relationship, can be Fearing that you may not be as talented or as capable as you thought, can feel like staring into the abyss. In a desperate bid to save ourselves from drowning, we often clinging to the very ship that's sinking. At one time we thought it was a seaworthy vessel. As it takes on water, swimming seems terrifying, turning back seems impossible, and no other alternatives come to mind. So we hang on to the sinking ship, knowing that if we hope hard enough, we'll be rescued. You are much more likely to be successfully rescued if you are the rescuer.
Now, back to the question; how do you know?
Where is the line and how do you decide whether or not to walk out on that job or on that relationship or on that dream home or that dream of fame and fortune? Couldn't staying the course, be an act of courage, and not a sunk cost? It could. Your first order of business will be to break the chains of the sunk cost fallacy. Doing so is a motive problem, not just a fear problem. Here are five things you must do to free yourself.
Number one, focus on reality. This is something that we talked about in part one of the sunk cost fallacy conversation. If the ship is sinking or the emperor has no clothes, pretending that neither is happening will not save you. Instead, it will absolutely harm you. Wishing it wasn't happening doesn't make it un-happen.
Number two, seek advice from those who are qualified. You're most likely to find someone qualified among the ranks of those who have gone through their own shipwrecks, or near shipwrecks, and navigated safely home. I. Land lovers who have never stepped on a boat, but shout from the shore, won't help.
Some people have professional credentials that may qualify them to provide some guidance.
All of this is especially important when relationships are in jeopardy. Suffering in silence doesn't patch the hole in the boat.
Number three, make small mistakes now. If you must endure a painful loss of a few thousand dollars now, along with some humiliation, make the mistake. It's much easier than waiting until your head is the only thing above water, then losing everything.
Have difficult conversations while the problems are small. Chapter 10 of Jordan Peterson's book, 12 Rules for Life, which I highly recommend, has some really profound explanation and counsel for couples. I highly recommend that you read the analogy in that chapter about the monster under the rug.
Choosing small mistakes is an act of free will. Failing to choose small mistakes in time will often result in you suffering from larger losses later, and those are often not an act of free will.
Number four, beware of picking teams. You will be prone to ally yourself with those who argue in support of your situation, even if it's harmful or shortsighted. They'll say things like, "build the house you can't afford," or, "tell everybody at the audition that the judges are dumb." "Tell people, your product is great, though you know it doesn't work." "Stay in that hostile relationship," and so on. If you seek opinions, Be sure you're not just appointing advisors who echo your own fallacy.
Number five, do things for the right reason. If staying the course is risky, dangerous, prideful, or self-serving, it's time to reevaluate. Pride goeth before the fall, always.
Now the last sentence of that question that we've already mentioned twice was, "couldn't staying the course be an act of courage and not a sunk cost?" The answer at this point, after the above counsel has been followed, is a resounding yes.
If your new motive is to look reality in the face and strengthen yourself by overcoming difficulty, by increasing in capability, persistence, skill, understanding, gumption, and the kind of self-esteem that can only come from accomplishment, then by all means, do it.
If you are trying your best to honor a marriage covenant. And can do so without endangering your physical, mental, emotional, or spiritual wellbeing, or that of others, the reward can be well worth the effort, however great the effort was. If you go home from the audition and decide to work harder at developing your musical skills, they can still bless your life with or without an audience. If you choose to be honest about your product and partner with someone on a new roadmap and successful product launch down the road, even, if it means taking a few steps back right now, you'll be more successful in the long run. If you decide to sell the house, take the hit, get out of debt, and reinvest in a better way, you'll be far better off.
The hardest things produce the greatest rewards, if our motives for doing so are pure.
So if you're going to have a staring contest, stare fallacy in the face, square your shoulders, and step confidently into your new real and much better future.
It can be done and you can do it.
We'll talk again soon.
