I’m a huge lover & student of neuroeconomics. With it’s comprehension & study we can weed out flawed decision making processes, make better decisions & understand ourselves more.
Which basically means any cost that is unrecoverable by any means.
Countless common examples are used. Today, let’s focus on food. (Although feel free to insert any scenario that suits you particular situation or need.)
Let’s say you go to the grocery store one day when you’re hungry & tired. You’ve been trying to watch what you eat. But with your willpower depleted & hunger overwhelming you, you grab all sorts of snacks & sugary things. You get them home. Unpack your groceries. Then, after a short rest (or nap) look for something to eat – only to find you have a refrigerator and/or pantry full of unhealthy food & snacks.
Do you eat them?
You paid for them after all.
Or, do you discard them knowing that eating them simply because they are there will hurt your health (and/or your waistline) in the long run?
If you focus on the money you spent, you’ll likely make an unwise decision (and consume the food you bought) – a decision you’ll later regret.
If you accept that the costs of your grocery store splurge can’t be recovered. But, that does not mean you have to eat what you bought… You might throw your unhealthy goodies in a bag and drop them off at a neighbor’s house, give them to a friend or find a homeless person or shelter & donate them. Or even, toss them in the trash.
Anytime we put time, money or energy into something, we become invested in it.
The more resources we put in, the more invested we become.
The more invested we become, the worse our decision making process will actually be.
It’s a case of inaccurately viewing the present through the lens of the past.
A decision made at one point of time (even if good), at another point in time could be unhelpful, suboptimal or even bad.
Finances. Relationships. Business… This applies to everything.
Our thought process goes something like this:
We’ve already spent so much ___ going down one path or in one direction, we feel our ___ would be wasted if we now changed paths.
Or, put another way…
Knowing what you now know, would you choose to do the same thing?
Desires & goals change.
New input, information or data come out.
The only way to ascertain a good decision is to make it based solely on current circumstances.
Too many times we make a decision once (or the same decision over time.) Then…
Stick with it without question under the false assumption that past decisions remain relevant now.
To truly make progress…
To make healthy, good decisions…
We need to consciously (& constantly) re-evaluate decisions from a new vantage point – especially when new circumstances, situations, changes or desires arise.
With everything I now know in this very moment, would I ___? Or, do ___ again?
If not, stop what you’re doing. No matter how much time, energy, money or emotional investment you have put into it.
Chalk it up to experienced gained.
Then, make a different decision regardless of any feeling of loss.
Continuing down an old, outdated or unhelpful path comes at a high cost. Not just due to new, better opportunities lost.
It means neither you, your circumstances nor future can grow or evolve.
You’re limiting your potential. Stifling growth.
You’re stuck and not moving forward or on.
With sunk costs (as with many things) times does not make it easier to shift directions, let go or restart.
So, if a new decision needs to be made…
Do not put it off!