In some situations that we have been in for a long time, we may have to make critical decisions from time to time. Many decisions come to mind when things start to go wrong, such as considering quitting a job that hurts you or planning to end your relationship when it starts to wear you down.
In this content, we will talk about the ‘sunken price syndrome’ that misleads us when we have to make such critical decisions. This misconception causes us to focus on what we did in the past, not on what will happen in the future when we make decisions. In other words, instead of returning from the loss, it causes us to cling to the price we have paid.
If you watch a movie that is almost torture to watch, just because you paid for the ticket, you are suffering from this situation too:
Yes, sunk price syndrome manifests itself in simple situations like these, important decisions in your business life, and more. However, it appears in the decisions we take in the face of worsening situations, rather than the decisions that suddenly appear. In these cases, the thing that pushes people to make the wrong decision is the investment they make in that matter. That is, the cost outweighs the yield.
For example, in your 4-year relationship that you brought to these days in a healthy way, you realized that even if you wanted to get married, the other party was not and would not be willing to marry. While it’s hard to leave when emotional factors come into play at this point, the logical decision would be to view it as an experience and focus on your own path.
But sunk price syndrome forces you to focus on the investment you have made in these 4 years, that is, the effort you put forth. When you focus on these efforts, you find it difficult to see the logical decision we just mentioned, and you stay in the relationship hoping it will get somewhere. In other words, when you need to make a decision, you make it by looking at the past, not with current and logical thinking. Therefore, you see the irrational decision as an investment.
Of course, there are certain reasons behind illogical decisions. Let’s start with the first one: We don’t want to seem like we’re wasting our time, money and effort
Continuing with the relationship example, let’s consider what you did in the 4 years in question. If you value the money you spend or the spirituality, if you value money, many things, such as the time you spend together and the gifts you receive in return, seem to go to waste the moment you end your relationship.
Or if your investments in any field are constantly taking something away from you and never yielding a return, the logical thing would be to invest your money in more sensible areas. But the fact that you have invested a lot of money in this area until now does not leave you, and you do not want it to go to waste, so you think that you have to go all the way.
A second reason stems from finding losing unbearable: “Did we spend all that money for nothing?”
Richard Thaler, one of the leading names in the field of behavioral psychology, explains this situation with the words, “Accessing the right to use a product or privilege with money will increase its usage rate”. For example, imagine that you and your friend are telling different dishes from outside and you don’t like the food that comes to you.
Even though your friend will share the extra meal with you, it is possible that you try to eat your own yam, which you overpaid, just for this reason. Or, you are more likely to choose to go to a movie that you paid for in advance, than to go to a movie that you can go to for free with your friend later on.
Or even if a game you buy for a lot of money starts to get boring, you can continue playing just because you paid for it.
Because in each case, you will lose your investment. Or is it really like that?
Relationships that had to end and business breakthroughs that did not bring them to the desired place… They all have a place: But this does not mean that things go wrong immediately
So far The problem with the things we talked about wasn’t sticking to what you were doing. On the contrary, sticking to something without giving up will often bring you good results. The main point of the sunk price syndrome is that you don’t waste your time resurrecting the sunken investments.
So, don’t make a decision for the present by looking at the past:
In a monetary investment you make today, your previous investments should not rule you. Or you shouldn’t take into account the time you’ve spent so far when reviewing your relationships. That doesn’t mean be cheeky. Rather, it means that you don’t make decisions based on the money, effort and most importantly time you lose while making decisions in the current time.
Instead, you have to make a decision taking into account today’s conditions. For example, imagine that you lost 80 thousand lira of your 100 thousand lira with your investment. Although it may seem sad, instead of thinking about that 80 thousand lira in your future investments, you should focus on how to use your remaining 20 thousand liras logically. Because that money is gone, never to be returned, just like the time and effort we spend on other occasions.
In the same way, you need to make decisions in your relationships by focusing on what you have in the current situation, not the time, effort or money you have spent from past to present. You may have spent 4 years with someone who hurt you. But if you are willing to sacrifice the fifth year so that these 4 years are not wasted, you still suffer from sunken price syndrome.
Watching a bad movie just because you paid for it, trying to eat a bad meal just because you paid it, continuing in a relationship that doesn’t work and hurts you just because you spend too much time You don’t ‘need’ to keep spending money on an investment you’ve spent a lot of money on but is failing every time.
If your investments will not pay off in all areas of life, accept this and remember the main enemy of sunken price syndrome at every opportunity: No matter where you come from loss, profit is profit.
Sources: United States National Library of Medicine, The Decision Lab, Intermittent Diversion
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