Gain time when you make bad decisions : the Sunk-Cost effect

When we think time optimization, we often think techniques, tools, methods, and processes. The Web is full of gurus who teach you how to do time-boxing like Elon Musk and how to automate your actions like Tim Ferris.

But these totally overlook one very important aspect : the psychological grounds on which our actions are built, especially when said actions are bad for us. So today we are going to cover together the much dreaded Sunk-Cost effect, also called “Concorde effect”, “sunk-cost fallacy” or “sunk-cost dilemma”.

  • Reading time : 3 mn.
  • Saving time : an awesome lot!

For those of you who follow my work, you already know how much I insist on the impact of decisions on time management. But if you haven’t read them already, you should make a quick stop by these complementary articles :

Now let’s start with this thing you are making decisions with… Your brain 😉

The Science of decision-making

The nucleus accumbens is part of the dopaminergic reward system. This part of your brain gets elicited when you see something you desire : food, a beautiful woman / man, a product of your liking….

On the other hand, the insula is activated when you suffer from aversion: from spending money or losing your membership privileges for instance.

When you are faced with a new decision to make, these 2 parts of your brain compete with each other, as you wonder : should I do this? Do the benefits really outweigh the disadvantages?

If the expected reward is bigger than the expected loss, that is to say if the nucleus accumbens overwhelms the insula… Your response is yes, and you jump in. But if the insula has the upper hand, you decide to pass.

This all makes sense but sometimes, the insula is actually urging you into action. And that is…

When you made a bad decision…

Let’s imagine you decide to start a new project with your company. Halfway through, you already have engaged time, money, and human resources into it (sunk costs, also called “retrospective costs”) and going on would require to engage the exact same amount of future “prospective costs”. But at that point you realize that the project will certainly not yield the expected results, and that the only output it might bring along is disappointment.

So the sound decision would be to abort and exit the sinking ship as fast as possible, right?

And this is when the Sunk-Cost fallacy comes into play.

Aborting the project would be very painful, forcing you to admit how bad your decision was in the first place. Your insula vigorously voices out its negative feelings and a little voice in your head tells you “Hey it’s too bad to stop the project now. Wait, maybe there’s a chance to make this right. Maybe we can fix the situation”.

To numb the pain, you decide to continue the project.

This is not the rational thing to do.

This is not the right thing to do.

… As you will experience sooner or later, when the project fails.

A notorious example : the Concorde

This example of the sunk-cost effect is so famous it gave way to an alternative name : the “Concorde effect”.

The Concorde supersonic airliner was the result of an agreement between the French and the British governments. It was obvious from the start that the project would not be profitable, but still time, energy and money were spent, until reaching a total cost of £1.2 billion. As a result, only 20 Concordes were produced, and after some 30 years of loss-making flights, the aircrafts were grounded.

A vicious circle

The hardest part about the Sunk-Cost effect is that the more you lose, the more you want to stay in the game.

For that reason, it is well-known by casino addicts and compulsive gamblers.

So what is the optimal strategy here?

Endure the pain to gain time!

There is a quote from ancient Roman philosopher Seneca which reads : “Errare humanum est“, literally “Error is human”… Yes, we human beings make mistakes sometimes.

But then Seneca also adds : “perseverare diabolicum” : “persisting (in error) is diabolical”. I guess that was his own way to say “Don’t cry over spilt milk” and “Let bygones be bygones”…

So I strongly advise you to follow this ancient piece of wisdom, and next time you are faced with a dilemma which involves sunk-costs… Just cut your losses and move away. This might be painful at first, but… No pain no loss prevention, which is another version of “No pain no gain” !

Have you faced the Sunk-Cost effect in your life? Tells us about your experience in the comments below 🙂

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  1. rouget.jerome says:

    It’s one of these things that I generally don’t want to admit… And it has hurt me badly in the past. Damn… Thanks for reminding me!

    1. ☛ Yo Nova ☚ says:

      Yes Jerome, it takes courage to admit it so congratulations to you !
      And you know what Gloria Steinem says : “the truth will set you free, but first it will piss You Off” !
      So just keep going 😉

  2. Pingback:Time-management + hypnosis = uh? - Time Master Freedom

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