Sunk Cost Fallacy

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I often warn friends and family about the sunk cost fallacy and its negative impact on decision making. Yet as I learned more about cognitive biases, I realized that our brain’s shortcuts are tools rather than traps. Their impact on our lives depends on how we use them. In the right settings, even sunk costs can induce meaningful change. Some real examples:

  • Investing $1200 to talk to a famous writer for four hours about the book writing process. The price tag inspired the amateur writer as much as the conversation to finally write up his book proposal.
  • Going into credit debt to attend an important influencer meeting in Central California. Going all-in forced this woman to overcome her shyness and approach some of the most successful marketers and authors in the U.S. She ended up acquiring mentors, and published a bestseller shortly thereafter.
  • Cortés, the Spanish Conquistador, ordered his men to burn all their ships after arriving in South America. This committed everyone to defeating the natives on pain of death.

These examples all have a common theme. The decisions were irreversible, conducive to achieving one’s goals, and represented a substantial investment to the involved parties.

People can use their innate loss aversion and overweighing of sunk costs to grow into the person they want to be. Hack your mental hardware, and reap the profits instead of uselessly spinning your wheels.

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