The Sunk-Cost Fallacy

Just because you started something doesn’t mean you have to finish it. Sometimes quitting is a good thing.

The Sunk-Cost Fallacy is where, because you have invested time / effort / money etc. into something, you feel you can’t quit. The cost of the thing makes you continue because you think that stopping would be a waste of all that time / effort / money etc. In reality however, if something isn’t worth it anymore, you should quit.

Loss Aversion

Humans are strongly loss averse. Losing something hurts more than gaining something by almost two to one. We’re naturally protective of the things we have and we focus more on what we may lose than what we may gain. This manifests itself when it’s time to move house, have a yard sale, or generally clean-up – people can have a difficult time parting with possessions. Similarly, walking out of a bad movie, turning around and asking for directions when driving around lost, or ending a relationship are all hard to do, partially because we are invested in them and we don’t want that investment to have been a waste. We don’t want to look foolish for having invested poorly so we double-down and continue with things we aren’t enjoying anymore to save face. By continuing forward no matter what we are increasing our investment costs as well as the damage by staying the course.

Sunk-costs are the investments we’ve made that can never come back – they’re in the past. They’re also irrelevant in considering our future paths. Past costs are looking backwards but your future choices are looking forward. For example, just because you’ve paid for a ticket to a concert doesn’t mean you have to go. If you’re feeling sick then maybe don’t go. The money you paid for the ticket is gone so all you have to consider now is: do I feel like going to this concert?

When evaluating potential courses of action, consider what is best for your future and don’t think too much about the past. The sunk-costs of your past can’t be recouped and sometimes it’s worth quitting something and turning in a new direction.

the Fallacy of Relative Privation

Just because someone else has it worse than you doesn’t mean you don’t have problems.

The Fallacy of Relative Privation is a faulty way of thinking where someone dismisses a problem because there are worse problems in the world. For example “Oh you think you have a bad headache? Well some people live with migraines for days at a time.” The idea of this kind of statement is that you should feel better, comforted by the knowledge that the situation could be worse. Unfortunately, knowing that someone has a worse headache won’t improve the condition of your headache. A more severe problem doesn’t negate a less severe problem.

This fallacy also goes the other direction. When judging people who are more affluent someone might say “What do they have to complain about? They’re rich & famous.” Just because someone is better-off than you doesn’t mean they don’t have problems. The idea of “First World problems” touches on this. While the day-to-day problems of a wealthier society are not as significant as the problems of a poorer country, wealthy people / societies still have problems.

If we follow the fallacy of relative privation to its logical conclusion, only the person with the absolute worst problem(s) could ever have any right to complain about anything. Obviously this is wrong. Therefore when considering problems, your own or the problems of others, remember that all problems are problems regardless of severity or whose they are.