We’ve all been reading, or at least hearing about, “the secret,” which teaches how “the laws of attraction” work. But over twenty years ago, my husband, who is an engineer and, therefore, data driven and logical, first introduced me to what I believe to be a bigger (and better) secret. It is what economists call “sunk costs.” I still think of it as one of the most enlightened concepts I’ve ever learned and I try to apply it daily in my thinking and actions. When I define it, you will immediately get it. Yet it is one of the most challenging truths to embrace. Curious?
“Sunk costs” essentially means that just because you have invested time, money, or energy into something, it doesn’t necessarily mean you should keep investing more. While economists and scientists are trained to discard hypotheses that don’t pan out, most of us tend to cling to what we’re already doing, even when the evidence is overwhelming that we’re wasting our resources for insufficient returns. This is why Dr. Phil’s question, “How’s it workin’ for ya?” is always so pertinent.
Here is a typical scenario we all face in one form or another on a regular basis: You’ve bought a ticket to an expensive play for Saturday night. Your good friend, whose taste is very similar to yours, sees the play on Friday night and reports to you that it’s just awful. He tells you that it’s boring and silly, a total waste of time. Do you still go to the play the next night? If you’re like most people, you will tell yourself, “I don’t want to waste all that money I’ve spent on my ticket, so I’ll go.”
But is this logical? Isn’t it more logical to think, “The money I’ve spent on the ticket is gone whether I go to the play or not. Why waste my time being bored at the theatre when I could do something fun or just stay home and relax?” If you truly embrace the concept of sunk costs here, you’ll never feel another twinge of guilt or remorse about tearing up an unused ticket.
Maybe theatre tickets don’t make you ignore the truth about sunk costs, but have you ever dropped more quarters into a slot machine or continued to roll the die at the craps table because you’d already lost money so your luck just had to change? The casinos rely on us to hold onto this “make-believe” logic. They are betting and winning on our inability to embrace sunk costs. They know that the more we spend, the more likely we are to irrationally keep trying to make up for it.
Here’s another example: Your child signed up for a week-long day camp that cost you a pretty penny. After two miserable days at camp, she comes home bored and uninspired, telling you she absolutely hates it and would rather stay home and do nothing. Some of us might try to convince our child that maybe the next day will get better. But what we’re really thinking is, “If she doesn’t go back, all that money I spent will be wasted.” The concept of sunk costs reminds us that whether she goes or stays, the money’s gone. So presuming you don’t need to pay for a babysitter or your child isn’t about to drive you crazy at home (a big presumption, perhaps, but you get the idea), your child staying home for the rest of the week is a logical and legitimate option.
You don’t gamble, you hate the theatre, and your children have always adored camp? Okay … then have you ever stayed in a relationship because you’d already invested so much of your heart and soul, not because it was actually working or even healthy? Did you ever convince yourself that the crumb you were being tossed was a full meal, telling yourself, “I’ve given so much of myself to him. Maybe he’s really going to change this time. I’ll give him one more chance”? If we hold the awareness of sunk costs, we may find it easier to let go a little sooner or without quite as much struggle.
