Notes On Sunk Costs

When you begin to climb Mount Everest for the first few days you are walking along these low-grade paths at the base of the mountain.

It is only after a few days - towards the end of the summit - when the climbing gets really hard. By now you have invested so much time walking up to this point at the base of the mountain you are committed to completing the journey. 

Giving up at this point would mean losing all the time you put into the process in the first place. Even if this choice is the rational one. 

Of course, most of us are not climbing Mount Everest, but are climbing our version of Mount Everest. 

How many people are 10-15 years into a career with a nice salary but absolutely miserable? How many people get to their residency in medical school and suddenly have that epiphany that they actually want to be an architect, not a doctor? 

Most of us dismiss these thoughts as "could have been" or "should have been". We imagine do-overs. 

This is the sunk cost fallacy. 

We believe that we have put so much time and energy into getting to where we are now that to turn around and go back down those paths would be a disaster. We would have spent all this time getting to where we were with nothing to show for it. 

So we continue down the metaphorical paths knowing full well we must recoup our investment. 

The investment is gone regardless of what we decide from this point on. There are no do-overs. We can not go back in time. 

The easiest way to understand the concept of sunk costs is thinking of everything you have as a gift from past yourself. 

Because that is essentially what it is. YOU did not pay for that college education, your past self did. 

That new car, that education, your career, these are all examples of gifts to your future self. You must then ask yourself if you found this today for free, would it be worth it? 

With any activity you must ask yourself is this bringing me value am I getting joy out of this? If the answer is no you should think of it in terms of being a gift from your past self. Are you willing to accept this free gift now? 

Sunk cost does have one important component it allows you to get over the hump and push past wanting to quit. 

For example, I made a macro decision a long time ago that I was going to be the kind of person that got 10,000 steps every day. 

There are times where I do not feel like getting those steps in or my schedule does not make it convenient for me to get those steps done. 

However, I have sunk costs.  

I have a streak of days running and I have a vested interest in keeping that streak going. 

So sunk costs help me get over the hump and otherwise continue doing what I have been doing instead of quitting.