Welcome back to another episode of The Dating Game!
I have really enjoyed the similarities between finding love and managing money. A few of the comparisons I have made are a stretch, but others are undeniable. Today, I’m confident, will be undeniable.
I have spent much of my time recently dishing out advice on How To Get A Girlfriend and How To Pick Up Chicks. I hope you have found the information not only entertaining, but also useful. Today I will do a complete 180.
Exit Glamtown, Enter Gloomville.
Before I give you revolutionary dating advice, let me begin by giving you a brief lesson in Economics. I promise this won’t be miserable.
What Are Sunk Costs?
Sunk Costs are costs that have already been incurred and cannot be recovered.
What Is The Sunk Cost Fallacy?
The Sunk Cost Fallacy is your error in decision-making by placing any sort weight on sunk costs. Retrospective costs that cannot be recouped should have no weight on future decisions.
This sounds fairly simple; however, it’s an error in judgment that we’re all guilty of.
Don’t believe me?
Here’s an example:
Let’s say you’re watching an episode of The Bachelor. The show ends quickly (you’ll have to pretend here because this show never ends quickly) and all of a sudden you’re watching a made-for-TV movie on ABC. The movie grabs your attention at first but you lose interest about 30 minutes in. What do you do?
You do something else. Why would you continue doing something that you’re not interested in?
Now let’s say you are feeling crazy and decide to visit the movie theatre by yourself. You fork out $10 for a movie ticket. Seems expensive but you’ve heard great things about Magic Mike and you REALLY want to see Channing Tatum dance. The movie starts out great but then it loses you about 30 minutes in. You suddenly have zero interest in Mike’s Magic. What do you do?
The common response: You have paid for a movie ticket, so you might as well sit through the rest of the movie.
The correct response: As in the original example, you do something else.
The $10 you paid for the movie ticket is irrelevant.
1. You have paid for the movie ticket and you receive minimal enjoyment (from watching the entire movie).
2. You have paid for the movie ticket and you do something more enjoyable.
Advice: Don’t be afraid to abort a movie early. If it sucks, it sucks. It probably won’t get better.
Maybe you don’t visit the movie theatre too often so the above examples don’t resonate with you. Let me tell you about a humorous experiment.
Behavioral Economists Arkes and Blumer gave people the following scenario:
On your way home you buy a TV dinner on sale for $3 at a local grocery store. A few hours later you decide it’s time for dinner, so you get ready to put the TV dinner in the oven. Then you get an idea. You call up your friend to see if they would like to join you for dinner. Your friend says “yes” so you run to the store for a second TV dinner. However, all the reduced priced TV dinners are gone. Therefore you have to spend $5. As soon as you get home and cook both dinners, your friend calls to say they can no longer make it. You are not hungry enough to eat both and you cannot freeze one. Which one do you eat?
The results show that most logical people didn’t have a preference. You have spent $8 regardless of which TV dinner you choose so the choice doesn’t matter.
This seems like a easy concept to grasp; however, about 25% of those asked said they would eat the $5 dinner because they spent more on it. This irrationality can only be explained by the sunk cost fallacy.
The Sunk Cost Fallacy Is Everywhere
You’ll notice politicians arguing to continue costly projects solely because they’ve spent so much so far. You’ll see businesses continue developing products that don’t work because they’ve already tested them so thoroughly. And you’ll see girls and guys everywhere hang on to a relationships only because they’ve invested so much of their time already.
It would be tough to start over, right?
Dump That Chico(a).
I hate when I hear people say things like “well….we’ve been together for 5 years so…”
Just because you’ve experienced 5 years of misery doesn’t mean you should experience 5 more.
Advice: Just like leaving a movie early, don’t be afraid to abort (maybe a poor choice of words?). If a relationship sucks now, it probably won’t get any better.
Do yourself a favor and keep fishing in the proverbial sea.
Readers: Are sunk costs affecting your decisions? Have you ever hung on to a relationship longer than you should have? What’s your favorite TV dinner?