Many of us have heard of the sunk cost fallacy. Many of those of us who have heard of it know that it describes something bad. So why do so many of us still talk as though we either haven’t heard of it, or don’t realise it’s bad (hint: the answer is, itself, an example of the fallacy – it is too difficult an adjustment to admit that many things we always thought were positive or sensible actually aren’t)? And what makes some people really good at avoiding it?
The sunk cost fallacy is simple to explain. It refers to any situation where we carry on with a project or activity because we don’t want to waste the resources invested in it to that point. Resources may be money, time, energy, or other.
We know this is bad. If something is going to turn out bad, the fact we have “invested a lot in it” is irrelevant. We should still quit. This is most obvious when it comes to gambling, but equally true in many situations. We know there are many reasons why we don’t quit. Wikipedia lists five, from loss aversion to optimism bias to a sense of responsibility.
But it omits a key reason, which I will call the “protestant heroism bias”. And yes, I know it has nothing to do with either protestantism or heroism, but it has everything to do with stereotyped ideals of them. What is this? Well, I see it every day among my writer friends. It’s what underlies the advice to “never give up.” I have never really understood this advice yet we are sold it constantly. Especially in sport, the arts, and careers. “Never giving up” is the practical outcome of “following your dream.”
We are often told that perseverance is the key quality in success. And it’s true – those who succeed will have persevered. But the opposite is not true (this is another bias – the “necessary vs sufficient” bias). Many, if not most, who persevere will not “succeed”. They will just have expended more effort in getting nowhere. And as a result of not quitting in pursuit of something at which they were never going to succeed may well miss out on the opportunity to pursue something else successfully. They embody the principle of moving quickly away from a goal rather than slowly towards it.
We must know this is true. So why do we still relentlessly tell people not to give up on things when giving up and trying something else will be the right answer more often than not? I would suggest a strong reason is that we believe perseverance is heroic in itself. And we believe effort for effort’s sake is good in itself. Relentless pursuit of a goal typifies both of these. In British culture, this might explain our love of plucky failures.
But perseverance is not heroic. It’s just a way of pursuing a goal whose wisdom depends upon whether the continued pursuit is tempered by listening to evidence, by iterative adjustments in response to evidence, and being as open to stopping after 10 years as one was after 1 day if the evidence suggests it is prudent. Perseverance in the face of adverse evidence is obstinacy. And perseverance without consideration of evidence at all is poor methodology.
Likewise, effort for effort’s sake is poor use of resources.
We can see this really clearly if we look at extreme sport. My spouse and I were considering, appropriately, this question while on ultra marathon training. One thing we wondered was the direction of causality. Are successful people at extreme sports successful because they are less susceptible to the sunk cost fallacy? Or are they taught to be less susceptible to the sunk cost fallacy by extreme sport? The latter would offer intriguing training possibilities.
Nowhere is the link clearer than high altitude mountaineering. It is often said that if you keep putting one foot in front of the other you will eventually reach your goal…unless you’re climbing Everest. In which case, you may die. And that, in a nutshell, is it. Sometimes the sunk cost fallacy has REALLY bad consequences. And high altitude mountaineering really focuses the mind on that. However much time or money you have put into getting to 8601 metres, if you start to feel sick in a certain way, you know you don’t even think about getting to 8602. You go down. Now.
Other “extreme” sports are full of exactly the same kind of calculations, if most of them have lower consequence. One of the reasons ultra marathons often have high attrition rates at the elite level is not because elite athletes are really bad at race planning. It’s because they’re really good. If something is wrong after 70 miles, then carrying on for another 30 just to finish is often a really bad move. Better to pull out straight away.
And that brings us to the other key skill of endurance and extreme athletes. Not only are they willing to quit when it’s right. They get really good at distinguishing between “this sucks, I want to quit” and “this is going to be bad, I need to quit.”
The first step to learning the difference is destigmatising quitting. Once we accept that pulling out, drawing a line under sunk costs, is a legitimate strategy for reaching success, we can start analytically and empirically working on learning when we need to carry on and push through a slump and when we need to draw a line. We are constantly taught not to quit when we should be carrying on. But we are not taught enough not to carry on when we should quit.
What we need is to stop attaching moral worth to the decision to persevere, and start to attach value to all decisions in a process based on their prudence.