Sunk Cost Fallacy of Friendship, Love and Life
Recently while having a conversation on changing trends in hybrid applications development with a fellow geek, I heard this phrase from him - sunk cost fallacy. For the purposes of communication, I could extract its meaning from the context and thus carry on a stimulating discussion, a pleasant change from the mindless drivel we usually indulge in. However, for some reason, maybe because it struck me a little bit odd that he knew a phrase which I hadn't come across, given his disregard towards vocabulary building and language eloquence, that phrase stuck in my head. And now with a superabundance of leisure time on my hands, I looked it up and had quite an epiphany.
Let's take it from the top. Sunk Cost in economics is a retrospective (past) cost that has already been incurred and cannot be recovered. The argument which occurs over it is its effect on current actions and decision-making. According to traditional microeconomics theory, sunk costs should not affect a rational decision-maker's best choice. But as it turns out, this fails to predict real world investment scenarios, as people do in fact consider these in their decisions. With the basics in place, let's have a look at 'sunk cost fallacy'. Since retrospective costs are irrecoverable, people have a tendency of including any bad expenditures committed in the past in their loss calculations as a part of their loss aversion strategy. Humans value loss aversion above all it seems - well that isn't surprising. But this inclusion is termed as irrational behavior by economists, in keeping with their theoretical foundations. And thus, termed as a fallacy - it doesn't make sense to include a factor in a calculation which doesn't really affect it.
So a lot of economics jargon, but this would be tough to understand by anyone who gave economics primer a pass (which includes me). So where did the epiphany come from? As Wiki explains it through a movie ticket example - sunk cost fallacy is the irrational decision of watching a bad movie just because you've bought the tickets and want to get their worth. The fallacy here arises from the fact that you're misallocating precious time to a non profitable endeavor. And herein came the epiphany - of applying sunk cost fallacy to the different relationships we come across in life.
Relationships are nothing but emotional investments, with the occasional inclusion of materialistic expectations attached, made on people you come across in your lifetime. As with every other investment, there are risks involved and one's approach often changes from investment to investment, based on learnings from previous ones, gut feelings, advises from peers, etc. And loss aversion, being hard coded in our DNA, comes into play here too, as we choose to get into social contracts which if not profit us then at least do not cost us considerable loss. The fallacy here then presents itself in carrying on with a relationship/contract which causes considerable anguish, frustration, pain for reasons varying from a hope of getting rewarded sometime in the future, to considering the collateral damage the termination would cause to the stakeholders involved. One misallocates precious resources of time, energy and emotions (yes emotions are a valuable resource in our social setup) on a non profitable endeavor. But why talk in generalities, let's break it down further.
Friendships. This is the first relationship which a human learns to form once stepping outside the arguably safe zone of family. And there can be no doubts of their importance and the role they play in one's social life. Ranging from the innate character to seemingly irrelevant decisions, they have a huge impact on shaping these up. Sometimes a good friend is all you need to calm you down in bad times and help you find a way out - thus a prospectively sound investment. Nevertheless, these contracts can often become painful bear-traps which get a stronghold of your leg and the more you try to move and wiggle out, deeper they sink their teeth and draw blood out of you. But as any experienced forester would say, it's always better to free yourself in a snap with all the help you can attain rather than waiting around for conditions to become more amenable. The fallacy here is waiting for all your emotional investments to pan out and hoping that your friend gets clear headed enough to see that you're in pain, meanwhile sinking further energy and time down this drain (a variable sunk cost). If true loss aversion is what one desires, one should get rid of such plaguing relations and rid themselves of long term irrecoverable losses.
Love. This is often regarded as the most important relationship of all. Consequently, most mistakes are committed on the path of finding the right one here. It's definitely no fallacy when they say that love changes people. History is filled with examples people going out of their way to create empires, wonders, masterpieces and even destroying competing ones for want of love. Also, this investment comes with the most severe risks involved - one only needs to see the number of suicides due to heartbreak to know that. However if the venture pans out in your favor (OK mutual favor, with the parties involved - one sided relations are a bad investment at the end of the day), you may well have found yourself your foundation rock from where you can build on a steady, happy life; an anchor who'll keep you from floating adrift on crazy seas; a keystone who'll hold all the pieces of your life together. But when it doesn't, it's definitely a thorn in your side, with the thorn being the size of a great-sword, poisoned and millimeters away from nicking a major artery. As ironic as it seems, even with such severe repercussions, love is something one finds it most difficult to give up on. Irrationality, fueled by passion, blinds people from seeing the obvious, and sometimes even after realizing that one needs to get out of this quicksand, the lack of heart simply doesn't let them, causing them to pour one's sheer life force down this black hole (a variable sunk cost). Thus the fallacy exists with dire consequences here, and if loss is to be averted, one should always make a clean cut and move on in cases of failures.
Our life, or let's say a major portion of it, is the sum total of all the returns we get out of the above and similar social investments. Since sunk cost fallacy is closely intertwined with irrational behavior, and emotions and social life are anything but rational, ergo these fallacies are an inadvertent part of our lives. But they're fallacies no less - you don't have to keep holding on to something painful when better, brighter and happier prospects are right in front of you. Devoting time and energies there may salvage them in a rare case but the odds of it are celestial. It's always more profitable to move on to the next big thing in life. Who knows, your reluctance might have already caused you to overlook some great friends, a true love, and a happy and content life?
Let's take it from the top. Sunk Cost in economics is a retrospective (past) cost that has already been incurred and cannot be recovered. The argument which occurs over it is its effect on current actions and decision-making. According to traditional microeconomics theory, sunk costs should not affect a rational decision-maker's best choice. But as it turns out, this fails to predict real world investment scenarios, as people do in fact consider these in their decisions. With the basics in place, let's have a look at 'sunk cost fallacy'. Since retrospective costs are irrecoverable, people have a tendency of including any bad expenditures committed in the past in their loss calculations as a part of their loss aversion strategy. Humans value loss aversion above all it seems - well that isn't surprising. But this inclusion is termed as irrational behavior by economists, in keeping with their theoretical foundations. And thus, termed as a fallacy - it doesn't make sense to include a factor in a calculation which doesn't really affect it.
So a lot of economics jargon, but this would be tough to understand by anyone who gave economics primer a pass (which includes me). So where did the epiphany come from? As Wiki explains it through a movie ticket example - sunk cost fallacy is the irrational decision of watching a bad movie just because you've bought the tickets and want to get their worth. The fallacy here arises from the fact that you're misallocating precious time to a non profitable endeavor. And herein came the epiphany - of applying sunk cost fallacy to the different relationships we come across in life.
Relationships are nothing but emotional investments, with the occasional inclusion of materialistic expectations attached, made on people you come across in your lifetime. As with every other investment, there are risks involved and one's approach often changes from investment to investment, based on learnings from previous ones, gut feelings, advises from peers, etc. And loss aversion, being hard coded in our DNA, comes into play here too, as we choose to get into social contracts which if not profit us then at least do not cost us considerable loss. The fallacy here then presents itself in carrying on with a relationship/contract which causes considerable anguish, frustration, pain for reasons varying from a hope of getting rewarded sometime in the future, to considering the collateral damage the termination would cause to the stakeholders involved. One misallocates precious resources of time, energy and emotions (yes emotions are a valuable resource in our social setup) on a non profitable endeavor. But why talk in generalities, let's break it down further.
Friendships. This is the first relationship which a human learns to form once stepping outside the arguably safe zone of family. And there can be no doubts of their importance and the role they play in one's social life. Ranging from the innate character to seemingly irrelevant decisions, they have a huge impact on shaping these up. Sometimes a good friend is all you need to calm you down in bad times and help you find a way out - thus a prospectively sound investment. Nevertheless, these contracts can often become painful bear-traps which get a stronghold of your leg and the more you try to move and wiggle out, deeper they sink their teeth and draw blood out of you. But as any experienced forester would say, it's always better to free yourself in a snap with all the help you can attain rather than waiting around for conditions to become more amenable. The fallacy here is waiting for all your emotional investments to pan out and hoping that your friend gets clear headed enough to see that you're in pain, meanwhile sinking further energy and time down this drain (a variable sunk cost). If true loss aversion is what one desires, one should get rid of such plaguing relations and rid themselves of long term irrecoverable losses.
Love. This is often regarded as the most important relationship of all. Consequently, most mistakes are committed on the path of finding the right one here. It's definitely no fallacy when they say that love changes people. History is filled with examples people going out of their way to create empires, wonders, masterpieces and even destroying competing ones for want of love. Also, this investment comes with the most severe risks involved - one only needs to see the number of suicides due to heartbreak to know that. However if the venture pans out in your favor (OK mutual favor, with the parties involved - one sided relations are a bad investment at the end of the day), you may well have found yourself your foundation rock from where you can build on a steady, happy life; an anchor who'll keep you from floating adrift on crazy seas; a keystone who'll hold all the pieces of your life together. But when it doesn't, it's definitely a thorn in your side, with the thorn being the size of a great-sword, poisoned and millimeters away from nicking a major artery. As ironic as it seems, even with such severe repercussions, love is something one finds it most difficult to give up on. Irrationality, fueled by passion, blinds people from seeing the obvious, and sometimes even after realizing that one needs to get out of this quicksand, the lack of heart simply doesn't let them, causing them to pour one's sheer life force down this black hole (a variable sunk cost). Thus the fallacy exists with dire consequences here, and if loss is to be averted, one should always make a clean cut and move on in cases of failures.
Our life, or let's say a major portion of it, is the sum total of all the returns we get out of the above and similar social investments. Since sunk cost fallacy is closely intertwined with irrational behavior, and emotions and social life are anything but rational, ergo these fallacies are an inadvertent part of our lives. But they're fallacies no less - you don't have to keep holding on to something painful when better, brighter and happier prospects are right in front of you. Devoting time and energies there may salvage them in a rare case but the odds of it are celestial. It's always more profitable to move on to the next big thing in life. Who knows, your reluctance might have already caused you to overlook some great friends, a true love, and a happy and content life?
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