The sunk cost fallacy

Sunk shipwreckAs the New Year approaches, we tend to look forward and think about what has been and how we want things to be different.

The more time, money, effort or love we have invested in something, the less we are inclined to let it go, even when the evidence is that it is a lost cause.

The sunk cost fallacy prevents us from realizing the best choice is to do whatever promises the better experience in the future, not that which negates the feeling of loss from the past.

Studies show lower animals and small children do not commit this fallacy. They do not care how much they’ve invested or how much goes to waste. They can only see immediate losses and gains. As an adult human being, we have the gift of reflection and regret, which changes how we react to our past.

As a simple example, have you ever overeaten at a restaurant because you have paid for the meal and want to get your money’s worth?

This New Year, notice what are you holding onto because of sunk costs in terms of time, effort, money or emotion.

From here on, is it going to keep costing, or start paying?

My best wishes, Paul

By Paul Matthews – Speaker/Author/Expert on Informal Learning and Workforce Capability
Author of new book “Learning Transfer at Work: How to Ensure Training >> Performance
and bestsellers “Capability at Work: How to Solve the Performance Puzzle
and “Informal Learning at Work: How to Boost Performance in Tough Times
Connect with Paul on LinkedIn or follow on Twitter

About the Author:

People Alchemy’s founder and managing director is Paul Matthews. Paul’s key skill is in making the ideas come alive with stories, and making sure his listeners receive practical tools and tips to take away and implement. He excels at reducing complex theory down to simple concepts and then articulating these in a way that everyone can understand, and more importantly, use to get better results for themselves and their organisations. Paul is a regular speaker at HR and L&D events and exhibitions covering topics such as harnessing the power of informal learning, capability at work, workplace performance, and how L&D can be effective in these tough times. He is also invited to speak on management and leadership, and how they impact on capability and performance at work.

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