In this conversation we explore the concept of sunk cost fallacy, which is the tendency to continue investing resources in something even when it’s no longer beneficial. Examples include staying in an unfulfilling job or relationship and continuing to pay for unused memberships or subscriptions.

Takeaways

• Sunk cost fallacy is the tendency to continue investing in something even when it’s no longer beneficial.
• Awareness of the sunk cost fallacy can lead to positive outcomes, such as saving money and building resilience.
• The fear of failure and the desire to maintain self-worth often drive the sunk cost fallacy.
• By reframing the story and understanding the emotional and fear-based aspects, individuals can break free from the sunk cost trap and embrace change.

Links, Corrections, and Whatnot

Nothing yet!

Other Ways to Listen & Subscribe

APPLE PODCASTS

SPOTIFY

Transcript

This transcript was generated by AI so please ignore any weird errors. If there is anything really terrible, let us know.

[00:00:00] Pam: Cognitive biases are these shortcuts that our brains take. They’re just sort of like a built in thought pattern that we’re not even aware that they’re happening and they are present for everyone. Different cognitive biases affect people to different levels, but everyone to some extent is affected by all of them.

That’s why they are these kind of rules about the way our brains work. And one that we want to talk about today is called sunk cost fallacy. So the definition of this is just, the phenomenon whereby a person is reluctant to abandon a strategy or course of action because they’ve invested heavily in it, even when it’s clear that abandonment would be more beneficial. So basically, this is just the irrational decision to do something because of a cost you’ve already incurred, and you can’t recoup that cost no matter what you do in the future.

[00:00:57] Sarah: And yeah, an emphasis on the irrational because the irrational is whatever this investment in it is no longer giving you a good return. So you’re continuing to invest in it just cause you have in the past and you don’t want to face the fact that possibly that was a mistake or at this point, it’s a mistake.

[00:01:16] Pam: Or you can’t even see that it’s a mistake yet. So like I said, this is something that everyone is subject to. Um, even businesses and governments make this mistake, um, because people are running businesses and governments and those people are making the decisions based on these inherent biases.

And it’s not just money, it’s time, emotions, effort. Any resource that you put into something can lead to this idea that you’ve already put so much into this thing. So even though it’s not working out, I’m going to continue doing it because somehow I’m going to recoup everything that I’ve put into it. Somehow I’m going to make this work out.

So let’s talk about some real life examples. One that is one of the biggest ones I think that we see the most is staying in a job or a relationship when you’re no longer happy because you’ve put so much time into it already

[00:02:12] Sarah: Yeah, I see this very frequently with my clients who are contemplating a change and they’re at that point where they’re saying, well, I want to pivot to a new sector or a new role or self employment or whatever it is. And one of the things pulling them back or kind of keeping them in that moment of stuckness is this resistance to let go of the past.

Because there’s this thing of like, well, I’ve already spent years and years building up this skill set, making my connections here, um, developing this expertise. I can’t… it feels like a waste to let that go. It feels that’s exactly like, it’s like a sunk cost. Why did I do all of that? Why did I go to university to become a lawyer and spend all of this time and all of this money and all of this effort and then do a complete, um, plot shift and go in a totally new direction?

[00:03:02] Pam: And so the, the thought there is like I’ve done all of this work and even though I’m not happy, I’m gonna continue pushing here. I’m gonna continue doing this thing because of all of that time and effort and whatever that I’ve put in, even though I can look over here and go, I might be happier if I changed.

Um, so you’ve got that, like you were just talking about the, that sunk cost fallacy of I put all this time and effort in. And then you also have the fear of change that like magnifies it. So there’s no guarantee that changing is going to make you happy. So you just stay. And you commit to being unhappy or, or commit to this idea that you’re going to somehow make it better,

[00:03:49] Sarah: Make

[00:03:49] Pam: even though, make it worth it, even though all evidence is to the contrary,

[00:03:53] Sarah: There’s like this drive inside of you like, Oh my gosh, I’ve got to prove that this was, this can’t have all been for a waste.

[00:04:01] Pam: Right.

[00:04:01] Sarah: Yeah. I think the job one is really common. And the other one that you mentioned is staying in a relationship past its expiration date. Yeah. Because you just don’t want to admit that it’s no longer the right relationship. And that could be like a primary romantic relationship or a friendship or a business relationship, really any type of relationship that you’re investing time in. Um, that, you know, you feel like you’ve built something with this person and it feels hard to walk away from that knowing that the time and care investment you put into it.

[00:04:34] Pam: So let’s talk about some other examples. Um, one of them could be paying for a membership that you don’t use because you’ve already spent so much on it. We see this with gym memberships, right? Yeah. You keep it because you’re like, well, I’ve paid for it for the last year and I didn’t go, but I’m going to go now.

[00:04:53] Sarah: I’m gonna go twice a day to the gym to make up for it.

[00:04:59] Pam: Right. And then of course you continue to not go, or, you know, you make your New Year’s resolution and go for two weeks and then don’t go for the rest of the year. But there’s that, like, I’m going to make it worthwhile. I’m going to keep paying for it. And this time I’m going to do it.

[00:05:14] Sarah: Yeah. And, and something interesting about that too is like a gym membership or other types of memberships, for example, uh, to, let’s say a um, newspaper. Right? Or some kind of magazine. Let’s say you want, you, I want to, I want to read the New Yorker, right? Then you, you get a membership or you have a subscription to it and you’re getting it, and then it’s piling it up on the side table or the coffee table.

And wow, I don’t really actually have the time to read this, but I really insist on being the person who, who reads this. So they’re kind of like memberships, and subscriptions to things that we might deem in our brains as virtuous. That’s another, cause not only have we invested time and money, but we’ve invested in an idea of ourselves being the kind of person that does that thing.

So admitting, I’m, Hey, I’m not going to read these magazines or journals, or I’m not going to go to the gym. Forget this yoga membership, whatever it is, feels also like abandoning that vision we had of ourselves.

[00:06:16] Pam: And another thing that can happen is that you like, double down on Whatever you’re doing to make it seem even more worthwhile. So this happens sometimes with investments or gambling is you see that you have lost money. It’s very clear that you have lost money in this investment or, or in gambling.

So in order to make up that loss, you bet more or you put more into the investment, thinking that the outcome is going to be different and then you just lose more. But you can do this with but you can do this with what you were just talking about with like identity. Like, okay, I subscribed to the New Yorker to be this person that reads the New Yorker, and I haven’t done that yet.

So I’m gonna not only keep that subscription, but then I’m also going to subscribe to something else that reconfirms, that I’m that person that reads this type

[00:07:10] Sarah: I’m also subscribing to The Atlantic.

[00:07:12] Pam: Right.

Exactly.

[00:07:15] Sarah: like, just admit that you’re not going to finish reading them. geez. Yeah, that doubling down. That’s like the ultimate sunk cost fallacy.

[00:07:27] Pam: But we do this with any sort of content. It could be books, movies. Um, you know, there’s, there’s been times where I started a book and it is not what I thought it was going to be, or it’s not interesting. And then you get halfway through it and you’re like, I have to finish this book. And then like, I’ve got one book that I’ve literally been reading for seven years because,

[00:07:50] Sarah: What is the book?

[00:07:53] Pam: Well, it’s actually, um, it’s by an author that I love, John Irving, and I’m blanking on the title right now because I just thought of this

[00:07:59] Sarah: You’re like, it’s been a year since I picked it up.

[00:08:02] Pam: Well, It’s actually been three years because it was my beach book. So like when we lived closer to the coast, when we would go to the beach, that’s when I would read this book because I would just commit like this, I’m going to, you know, lay on the beach and read. And, but I never like fully got into the book. Um, you know, I don’t know if you’ve ever read John Irving. He’s, he’s got a way of writing that it takes. You know, a really long time to get the story and like, there’s a lot of character development and sometimes it can be very dry. And so it’s a big thick book, but I was committed to finishing it.

So I would read like a couple of chapters in a year and I wouldn’t give up on it. And that sounds like, you know, a silly example, but this is your time that you’re investing in something. And there’s a mental load to having this thing of like, I said I was going to finish this book and I haven’t finished it.

And it just sort of like, can weigh on you, that you are committed to doing this thing that you actually don’t want to continue

[00:08:58] Sarah: doing.

Yeah, you don’t want to do it, yet you can’t put the book down or give it away because you’ve started it. And you’re like, well, I already spent all those times at the beach reading the first six chapters over seven years that I can’t possibly let this go.

[00:09:16] Pam: Right. Because I am the type of person who finishes John Irving books.

[00:09:20] Sarah: I finished my books. Yeah. And I want to finish it.

It’s the same thing as ordering those magazines or, or joining the gym. It’s like, I want, you know, we have a vision of wanting to do it. Um, but, but our past actions are indicating that we don’t actually want to.

[00:09:37] Pam: Yeah. I wonder if there’s also a little bit of like fear of missing out there too, of like, if I don’t finish this, what am I not getting?

[00:09:45] Sarah: totally. Maybe in my eighth year, I’ll finally see.

[00:09:52] Pam: I probably will finish this book at some point.

[00:09:55] Sarah: that’s so good. Um, yeah. And then the next example on our list here in our notes is, um, courses, the sunk cost of courses. And this is something that came up organically in a previous episode. Uh, I mentioned that I had a propensity… this really developed a lot during COVID. For obvious reasons, um, or the reasons being I wanted to feel connected to things and feel like I was still living and growing and had something new to learn about from my, from my home office during COVID.

And so I joined a number of different online groups, memberships, online courses, and they range in price. Sometimes these programs can seem relatively inexpensive on a monthly, recurring, Um, fee and sometimes they’re not. They can range anywhere from, you know, 20 bucks, 50 bucks to… memberships can be $400 a month, you know, $1,000 a month.

Some memberships are out there, right? And then I think there’s also this idea of, well, if I invest a lot of money, then I’m definitely going to show up because I’ve invested all of this money to the contrary. This is not, I don’t, I know this about myself now. I don’t show up for open ended, go at your own pace courses online. I don’t.

There’s one course I show up for and it’s because I do it with a group of friends and we meet the next morning and we discuss it. And so I know that I will show up because I want to have something to contribute to the conversation. Uh, other than that, I don’t show up for these other programs.

But there’s a real sunk cost and I can, you know, be doing my monthly budgeting. And then I see on my visa, the recurring costs and think, Oh, again, I didn’t, you know, utilize that program. It’s such a great program. These people learn so much from it. I’m next month. I’m really gonna make up for, for the last four months and go extra.

Like, I don’t want to just sort of pull, I didn’t want to just pull the plug and be like, I’m not using this. Same thing with different online tools. Right? Notion, or any of these kinds of things that I might sign up for thinking, oh my gosh, suddenly I’m going to be so smart, so productive, have all my stuff together, and then I don’t use them.

And it just becomes this recurring monthly cost. That is a huge, uh, example of a sunk cost for me.

[00:12:22] Pam: You said something in there that was really interesting. You said, like, these other people are getting so much out of this,

[00:12:30] Sarah: The FOMO.

[00:12:31] Pam: So you have this… yeah. And you have this idea that somehow you’re less than because you’re not getting what you think other people are getting. You have no proof that they actually are.

[00:12:43] Sarah: isn’t that marketing at work?

[00:12:45] Pam: it’s, it is.

[00:12:46] Sarah: Yeah,

I mean, it makes sense. Like, we’re incurring these costs because we’ve been marketed to, uh, and we think it’s going to make our lives better, make us feel better, and then we have to admit, am I getting a good return on this, on these fees, or are they sunk?

And if they’re sunk, pull the plug.

[00:13:07] Pam: But that’s a rational thought pattern, which we’ll get into how hard it is to be rational in our decisions because we’re so impacted by these irrational biases.

So those are a lot of examples of sunk costs.

Let’s talk about some of the ways that being aware of this fallacy can positively impact your life.

[00:13:30] Sarah: Okay. Um, yeah. And, and I’m glad we’re talking about this because when we first mentioned this could be a good topic, your response was, Oh, goodie. This is my favorite… this is one of my favorite cognitive biases.

[00:13:45] Pam: I don’t think I used the word goodie, but yes,

[00:13:52] Sarah: Yeah.

[00:13:53] Pam: it’s, one of my favorite cognitive biases, for sure. It is. Because, you know, when you become aware of these things, there are so many benefits.

[00:14:01] Sarah: So many benefits. Well, we’ve just been talking about the money, right? So when you become aware of like, that’s a practical payoff when you become aware of, Oh, wow, this is a sunk cost. If it’s a financial cost and then you, you stop paying like, Oh, suddenly you’re freeing up your funds. So you can use your money in a more intelligent way where you’re getting a better return. So that’s certainly one. Um, I think as well, uh, so save saving money. Another is just becoming more resilient and more adaptable. Because you’re showing yourself that you can change your mind. So you’re going through the process of, Oh, wow. Like noticing, Oh, wow. This is what I’ve been doing. It’s no longer working for me.

I have the capacity to change my mind and go in another direction, even though it feels painful to admit that I may have wasted money, made a mistake. And I’m comfortable going in a new direction. I’m able to do that. So that’s really strengthening your own resilience.

[00:15:09] Pam: It’s empowering.

[00:15:10] Sarah: It’s empowering.

[00:15:12] Pam: Yeah.

[00:15:13] Sarah: Because then you know you can do it for other things.

You can do it for little things. You can do it for bigger things too.

[00:15:18] Pam: Mm hmm.

[00:15:20] Sarah: So that would be another one. So we’ve got the financial benefit. We’ve got more resilience and adaptability. As well, I want to talk about an emotional payoff, which is that, um, when we have a sunk cost, when we become aware of a sunk cost, I think we internally, there’s like a bit of an internal conflict. Because deep down, we know that we’re doing something that we don’t want to be doing, or we’re doing something that’s not good for us.

So we feel that kind of a dissonance. Like we know, Oh my gosh, I shouldn’t be doing this, yet somehow I’m still doing it. And that can cause us to feel anxious. Um, it’s the kind of stuff when I was reflecting on this, I was like, Oh yeah, this is precisely the kind of thing that can keep me awake at night. Right? Like you just feel like… you don’t feel congruent. Your actions are not congruent with what you want to be doing. So that kind of cognitive dissonance, the regret, the frustration, the anxiety, the self doubt, questioning yourself, all of that is like bubbling inside when you are feeding a sunk cost.

So becoming aware of it, suddenly you can make a new choice. And then those kind of emotional pains can be alleviated.

[00:16:46] Pam: And it’s kind of deciding which hard you want. Like, do you want the hard feelings and emotions of staying in this situation that’s not making you happy, or do you want the hard feelings of making a change and doing something different? Both are hard. You’re just making a decision of which hard you choose.

[00:17:09] Sarah: So good.

[00:17:10] Pam: So why are we like this?

[00:17:12] Sarah: Why are we?

[00:17:13] Pam: Why do our brains do this? Um, one of the big reasons is because If we admit that we’ve, you know, put all this time or money into something… you know, I made this decision to go to school and pursue a major that I ended up hating once I got into the career, or I married this person and it didn’t work out, and now we’re gonna, you know, potentially get a divorce.

Those things feel like failures even though they’re not, it feels like you are failing at something because you put so much time and effort into it. Or because society tells you that if you don’t do X, Y, and Z, you’re a failure and no one wants to fail. It feels terrible to feel like you have failed.

And, you can have all of the evidence, you know, all of your, your friends telling you it’s okay to quit. It’s okay to get divorced. It’s okay to do whatever. And it, it almost doesn’t matter because like we said, these aren’t rational decisions. It’s an emotional decision.

[00:18:24] Sarah: Yeah. And like, you’re right. It’s there’s the emotion of perceiving that you’ve failed and judging yourself for that. And then there’s the emotion of feeling disappointed because ultimately you’ve, you made that choice because you thought it was gonna do something good for you. You thought it was going to give you what you wanted.

And then it’s really admitting to yourself, Oh, I, this isn’t giving me what I wanted, what I hoped it would give me. It’s not giving me the fulfillment, the love, the joy, the satisfaction, the return, whatever it is. It’s not giving me what I wanted. And that’s disappointment. And that’s so, so we have to admit it and sort of accept it.

[00:19:12] Pam: Or admit that we were wrong in some cases or that we’ve changed our minds. And we’ve talked before about how difficult it is to change your mind and, or admit that you’ve changed your mind

[00:19:25] Sarah: We don’t like to admit that we’ve been wrong, even though how could we not be wrong often in our lives?

[00:19:32] Pam: Constantly.

Yeah. Yep. So there’s this theory that the reason that we are so, um, tied to not losing this time or effort or resources that we’ve put in is this, um, it’s this idea of conservation of resources. So, in the past, we were living in times when resources were much more scarce than they are now, whether that was, you know, just food or money or whatever it is, you know, we live in a much more abundant society now than our brains evolved to live in.

So we have this tendency to really need to hold on to resources, whatever those are, because we didn’t live in such abundant times. So we’re still, our brains are still operating under conditions and information that don’t really align with reality right now. So we’re really driven to avoid giving up on things or, or letting go of resources that we’ve put in just because of our brains not updating to what reality is right now.

[00:20:43] Sarah: Yeah. There’s a, there’s a huge fear of letting, yeah, letting anything go that we’ve accumulated.

[00:20:50] Pam: And we think if we keep going, we can get out of the hole and then not only will we not have to have failed, but no one else will know that we failed.

[00:21:02] Pam: That, that’s a big part of it is not only admitting it to ourselves, but what are other people going to think?

[00:21:09] Sarah: yeah. And building on that is this uh narrative that we often hear and that we’re familiar with about people who have really stuck it out and worked really hard in order to crawl out of a bad situation and make it work. And so we think, well, I want to be that kind of hero too, like I, I should be able to figure this out.

[00:21:37] Pam: Yeah. And perseverance is praised. You know, we do, we hear all those stories. This person did, you know, they really, they really stuck it out and they pushed and they worked hard and they, you know, pulled themselves up by their bootstraps and they came out on top. And then on the other side, quitting is shamed…

[00:21:58] Sarah: yes.

[00:21:59] Pam: if it might be the right

decision,

[00:22:02] Sarah: Yeah. And I think it’s, it’s fluid because sometimes it will pay off to persevere,

[00:22:11] Pam: Of course!

[00:22:12] Sarah: Right? So we’re not saying, you know, every time you don’t like something you should quit because of a, because of sunk cost fallacy, um, but be aware of the bias. So, uh, a tangible example of this that comes up from time to time with my clients, uh, is around decisions to leave the workforce at a certain stage, like let’s say 40s, 50s, when there’s, when they’ve been paying into a pension. And so what, you know, the, there’s a real fee that they’ve been paying, um, for years and years. And it’s been building up and then is it worth it? Quote unquote, to stick it out for another 15, 20 years in order to reap the maximum benefit from that pension, because it feels like a real literal sunk cost to walk away,

um, and get a much, you know, relatively smaller amount after. And so that really becomes, there’s not a financial, a financial calculation is part of it, but this isn’t, as you were saying before, a purely rational decision. Right? There is a rational component, which is around the finances and the numbers and what you need and what you want.

And then there’s a lot of, um, other components to, to the decision as well. And so in a situation like that, how do you make a decision? Like in what, what would it take for the perseverance to be the right decision? And what would it take for the quitting or starting something new to be the right decision?

Like both could be right. Um, both could be wrong.

[00:23:58] Pam: Yeah. It’s hard to know when to give up on something. Like, when is it quitting? When is it the right decision? You know, when is it rational? And we’ll go through some steps to try and, um, analyze these situations in a more rational way, but I don’t think that there’s ever going to be a situation where it’s like completely clear, cut and dry. This is 100 percent the right thing to do.

Yeah. Um, so a couple of the other reasons that we are like this is, um, like we said, it’s emotional and emotions are not rational. Some of the interesting things that I learned while doing a little bit of research on this is that the more anxious you are, or the less rested, the more you will stick to the thing that you have been doing that isn’t working rather than making a change.

Because there’s this cognitive load to making a change. Like I said, it’s, it’s, it’s a hard thing to change your mind or to take action to do something that is different than what your kind of momentum is that you’re in right now. And the way our brains work, resources just feel more scarce when we are anxious or not rested or unhealthy.

I know that comes up for me with money. Like if I get into an anxious state for some other reason, I will feel more anxious about money at the same time, even if my financial status has not changed. So just being aware that it’s going to be even more difficult to make rational decisions or to make changes if you’re already in a state of anxiousness or, you know, some other unrest or being tired or anything like that.

[00:25:46] Sarah: yeah. And I think that’s a really great point. And I’m thinking of many conversations I’ve had with clients and people in my life, uh, for whom after a major life event, even, um, you know, even if it’s something that they view as positive, like becoming a parent. And then in the year following, or, or it can be something emotionally challenging, you know, a family situation, a loss in the family.

After that time, they think, well, I can’t handle any more change. So I’m going to stick with the status quo. And then I’m going to wait until I have more reserves, more of those emotional reserves in order to make a change. Um, and then, So it’s, it’s the other side of what you’re saying. Like when, when our, when our emotions, um, are taxed, when we’re feeling anxious, it’s harder to be rational.

[00:26:41] Pam: Or there’s this idea that I’ll wait for the right time. And the right time may never come, but you’re just like, I, you know, nothing else. Like I’m, I’m anxious. I’m tired. There’s all this other stuff going on right now. So I just can’t make that decision right now. So I’m going to wait for the right time.

And then you’re just in this constant, like, I don’t want to say making excuses, but like pushing it off.

[00:27:03] Sarah: Yep.

[00:27:05] Pam: And you also get a dopamine hit when you recommit to something. So if you think about like, you’ve, you’ve made a decision and you’re like, I’m going to, um, I’m going to make this marriage work. You start to feel, um, good.

Like, okay, we went to therapy. And so now I feel really good about this. And you get rewarded for recommitting to this relationship, even if nothing actually, changes and it’s still the same bad relationship you were in because you feel like you’re taking action or you’re recommitting to this decision you made, you get a little dopamine hit from that so you feel good about doubling down on the bad situation which can further prevent you from making a change and moving into a different situation

[00:27:57] Sarah: That was a really salient example, the one you just gave. And I’m thinking now about how we could… the similar type of, um, flow could happen with, let’s say we have a gym membership and then we go once a month, right? And so we get that dopamine hit of, Oh, I am using it. I am going to be the person that goes all the time.

And yet it’s not really doing anything to move the needle on our fitness goal or on our relationship with the gym. It’s just the minimum viable energy expenditure.

[00:28:29] Pam: Or, I’ve been going to the gym once a month, so now I’m going to upgrade my membership to have access to another area of the gym. I’m going to pay more because then I’m going to go twice a month. And right. you get that little hit because you’re like, I’m the person that I think that I am. I’m confirming that I am the person that goes to the gym.

And then you continue not doing it.

[00:28:49] Sarah: Yeah. It feels, yeah. So that’s it. We’re getting that dopamine hit to think I am the person that gets, who reads the New Yorker and goes to the gym or learns a lot online or uses all these tools like these other business owners who have all the internet tools and they figured it all out. I’m, I’m gonna, I’m just like them too because I ordered it.

So it feels. It can feel painful. Like it can feel like, why are we like this? Cause it can feel painful to be like, Oh, I, I’m not, I’m not that person that I thought it would be really great to be because I had a vision of, of what it was like to be them.

[00:29:26] Pam: Yeah. It’s ego.

[00:29:28] Sarah: It’s ego.

[00:29:30] Pam: And if your self esteem is tied to the thing, like if, if your self esteem is tied to being a person who goes to the gym or being a person who attends these courses online, whatever it is… saying I’m not that person, taking a hit to your self esteem, that hurts. That is painful and it’s much easier to continue to think that you are that person, even though you’re not.

[00:30:02] Sarah: Yeah. And that’s why self awareness and self acceptance is so important. Uh, because with that, you’re realizing, Oh, I, I can just be myself and accept myself. It doesn’t, I don’t have to be a person that goes to the gym and I’m just as worthy.

[00:30:22] Pam: Yeah. Or, you know, what’s the opportunity cost there of like, I keep telling myself I’m a person who goes to the gym, so then I don’t think of any alternative. So maybe I’m not a person who goes to the gym because I hate the gym, but maybe I’m a person who likes to walk outdoors or go for hikes or something like that.

If you’re not open to the alternative of who is that person that I think that I am, then you’re missing out on who you actually are or could be.

[00:30:51] Sarah: I think this is really the heart… One of the hearts of this conversation is the, is the relationship between the sunk cost fallacy and our, our self worth, our concept of self worth. Because somehow this continuing to pay a sunk cost, whether it’s financial or emotional, is, it’s tied to, um, it’s tied to us not accepting ourselves for who we really are.

And, and what really is going to, what really is going to bring value to our lives. True value.

[00:31:30] Pam: So, awareness is the first step in doing something about this. Um, I was trying to think of examples in my own life, outside of the book that I am never going to finish, potentially. Um, and I realized that We’ve talked before about how I’m, I had this story about being a quitter my entire life. So I’m actually maybe a little bit on the other end of the spectrum where I quit things pretty quickly.

I don’t, like, tie my identity or self esteem to a lot of things, so I didn’t have a lot of examples. In my own life of sunk cost fallacy, I would say that there may be like on this spectrum, some people that are like me, maybe on the other side where we quit things too quickly and don’t have it, but I have awareness of that.

And so, um, I have worked on maybe committing to things a little bit more and, and making that an intention of sticking to things and, and getting through the hard work of, of committing to it so that it can be rewarding. But regardless of where you are on the spectrum, just being aware and being able to like step outside yourself and, and look at what you’re doing and, and just question, like, why am I doing that?

What is the emotion behind it? And knowing that this is just how brains are. So it’s not your fault. There’s no blame in it. It’s just you’ve gotten into this pattern and you can change it.

[00:33:10] Sarah: Mm-Hmm. . Yeah. It’s so good. And I would say to be specific about that process is number one, like the awareness and the naming. So, number one, recognize that it’s a sunk cost. Like name it for yourself. Then number two, ask yourself, what’s the emotion behind it? And number three, what’s my fear? Because if we see that it’s a sunk cost and we’re continuing to spend it, there’s some fear.

Otherwise, cause as you, as we were saying, it’s not rational. Otherwise a rational brain would be like, Oh, I’m just going to make this shift in this moment, or in the next hour. So, if we’re not doing it, there’s a fear. Well, what’s the fear? Are you afraid that it’s going to make you look like a failure? Are you afraid that it’s going to make you feel like you’re not the person you want to be?

Leaving something behind, doesn’t mean abandoning everything you knew and everything you were from the past. Because you get to bring that with you. Your essence now includes that experience. Your contributions to the conversation, to all the relationships, to your work, to your world, will include everything you learned and everything you became because of that experience.

[00:34:34] Sarah: And I’m reminded when I think of this of a time in my life when I returned in third year university, um, to Montreal, where I was studying after spending a year in Hong Kong. I went on exchange to the University of Hong Kong. And I remember grappling with this. Um, this feeling and which I realize now I didn’t have the words, but it felt somewhat like a sunk cost to me.

Like I had gone there for the year all on my own. I didn’t know a soul. And I really, um, had a lot of growth to build a life and know my way around the city, the university. I made friends, I had a job, I worked as a teacher part-time. Like I did… I got to know, I traveled in China. I got to know all this new information.

Right. And then suddenly I left it never to return. Right. So I left it. I came back to Montreal and I remember feeling at odds. Like, well, what about all that experience? Like, I can’t even bring it with me. Like, what was it for? Is it just a memory in my memory bank? And I remember my dad telling me, well, you, you bring that with you.

That’s part of you now, and you’ll bring that everywhere you go. And that made sense to me. That made sense to me. And I found some peace in that. And I think it’s the same thing with all of us, with all of our chapters. That’s what makes us interesting, dynamic people, all the things we’ve done before and then changed course, they’ve evolved, we’ve made decisions to leave or they’ve left us, or whatever the situation may be, so that then we could do something else and then we get to bring all of that with us.

[00:36:31] Pam: Yeah. Yeah. If you think about the people that are the most interesting and have had the most experience and that you love hearing their stories and talking to them, they’re not the people that you know, stayed in the same job that they hated and relationship that they were miserable in and, you know, didn’t expand their horizons at all.

They’re the people that took a chance and tried something new and, you know, just followed happiness, really, um, whatever that is. But being able to make that decision and knowing when to quit something that isn’t healthy for you, or isn’t the right direction for you, I think is actually a sign of maturity and responsibility.

You’re taking responsibility for your life and for your trajectory and for your happiness, for your mental health.

So, um, reframing the story helps, um, the next thing is to remove emotion as much as possible by making this a rational process. So plotting out pros and cons of your situation and looking at the opportunity cost of if I keep doing this, what am I missing out on?

Yeah, because we get wrapped up in the fear, um, It can be hard to, as you said, to make a rational decision. So again, just writing this out in a factual way, uh, making it about the numbers or the possibilities. And sometimes when we’re really lost in our own sort of drama of the experience, and I don’t mean that in a condescending way, like we can become overcome with the trauma of our own situation, you know, getting an external person to help us, um, flesh it out, who has like an external perspective, can be really helpful to make it about the facts and the numbers versus the details of the story that carry more emotional weight for us.

So as always, we never have to do all the hard things alone.

Uh, the next thing you want to do is be realistic about what you can or what you will actually achieve in your given situation. So if we go back to the gym situation, you know, being realistic, like I’m really not going to go to the gym every day. The once a month that I’ve been going or the, or the no, no times that I’ve been going, that is realistic.

That’s not going to change. Like being able to actually look at that situation rationally and, and say what you will realistically change or do if you stay committed to the current situation.

[00:39:13] Sarah: Then you’re looking at, okay, if I’m realistically going to go once a month, is it worth the $150 a month gym membership? And when you, when you’re looking at it in that way versus a hypothetical scenario when you’re admitting to yourself what the realistic situation is, or is it worth it for me to stay in this program, this membership that costs $200 a month if I’m not showing up for three months?

You know, the answer is a clear no, right? Unless for you, it’s a yes, then you get to make it. And that’s not a sunk cost. But if it’s, if you’re not getting the return, when you’re looking at it that way, you can make a clearer decision.

[00:39:52] Pam: And, decide what would I rather do with that $200 a month. Like, fantasize about the five things that you would rather do with this money or this time or whatever the resource is that you’re putting in. Really think about what else you could be doing with it and build an emotional attachment to that

[00:40:14] Sarah: The new thing that you’re picking on purpose.

[00:40:17] Pam: Yes.

[00:40:19] Sarah: Good. It’s your life. It’s your time. It’s your money. It’s your resources. You get to pick.

[00:40:26] Pam: You get to pick. So pick, make an action plan, and, you know, like lay out the steps of what you’re going to do to course correct. So once you’ve made the decision that I’m going to change this, and then this is how I do it, because changing your mind or deciding to do something, and then not knowing how you’re actually going to accomplish it, isn’t going to move you forward.

So it could be as simple as I’m going to call and cancel my gym membership, but if it’s something more complex than that like, changing careers you need to know what your next steps are so that it feels manageable. And so it’s actually something that you can commit to doing.

Great. So, build awareness. Have understanding that this is just how our brains work. Reflect on the fear, the story that you’ve been telling yourself. Reframe that story. Remove emotion as much as possible by making rational lists of pros and cons. Be realistic about what you could achieve in the current situation that you’re in and then make an action plan so you know what to do next.

[00:41:31] Sarah: And best of all, when you find a cost that’s been wasted, so whether that’s time or money, when you identify that and you get to put it towards something that’s going to bring you more fulfillment, more joy, more safety, more excitement, whatever it is, if you’re picking it on purpose. Well, that’s a win for you.

[00:41:54] Pam: and celebrate that. Make sure that you are putting as much attention to the positive changes that you’re making as you are to what may have been lost.

[00:42:06] Sarah: I’m going to keep thinking about what other sunk costs I haven’t noticed yet, and I’m excited to, um, pull the plug on some of those.