This is optimal leaving daily episode 2212, Safe Air Well to Sunk Costs by J Harrington of LifeAndWim.com And I'm Justin Molick, the guy who's been reading articles, book excerpts, essays, sometimes stories every day, including holidays for over six years. Today is sort of holiday, a half-holiday I guess, New Year's Eve. Thank you for being here to start the New Year off-right. It means a lot.
And on that note, let's get this kicked off with a post from J Harrington as we optimize your life. Safe Air Well to Sunk Costs by J Harrington of LifeAndWim.com I can tell you how many hours I spend a laboring over the decision of whether or not to leave the practice of law, but had to be in the hundreds and most of that time was wasted. Don't get me wrong, there were some important issues I had to work through in order to make an informed, smart decision. For example, I needed to understand whether I could support our family and that my new career choice would provide more of what I was missing as a lawyer.
But those factors consumed far less of my time and mental energy than other wasteful musings. Namely, was it wise to walk away from the law degree I worked so hard for? Should I leave the prestigious law firm I was employed by? Was it a mistake to toss overboard that goodwill I had built up as a practicing lawyer?
Ultimately, I decided that making the leap was worth it. And in retrospect, I came to realize how unproductive it was to labor over so many things that didn't matter. I fell victim to the Sunk Cost fallacy. The Sunk Cost fallacy is a common cause of poor decision-making, including decisions about working careers, but the fallacy extends far beyond those domains.
A Sunk Cost is any past, cost of money, time, or effort that cannot be recovered. The investment has been made, and there is no getting it back. This fallacy arises in many different ways. Ever start a book, get bored halfway through, but plow on to the end nonetheless.
The two hours you spent reading shouldn't influence your decision about investing even more time in something that's not worthwhile, but it often does. The more energy or resources we devote to something, the harder it is to abandon it. If it's difficult to put down a bad book, you can see why Sunk Cost influenced my decision to stick with the practice of law despite wanting deep down to pursue something else. And I'm sure you can relate, as almost everyone has struggled to make a change due to an aversion to suffering a perceived loss of a past investment of time or resources.
Why we struggle with Sunk Costs One of the main reasons we fall victim to the Sunk Cost fallacy is that the status quo, no matter how dissatisfaction is often the path of least resistance. It involves no effort, risk, or transformation. Another reason is our tendency towards short-term thinking. While we all prefer big rewards over smaller ones, most of us have an even stronger preference for present rewards over future ones, even when the future ones are much more valuable.
This phenomenon, a type of cognitive bias, is called hyperbolic discounting. It stands for the proposition that the further a way a reward is in the future, the less of an immediate motivation there is to put the work in to realize it. Therefore, the tendency to value short-term rewards can lead us to double down on past investments because the promise of bigger long-term rewards seems less concrete. In short, we focus on Sunk Costs because it feels risky not to.
But given the fact that Sunk Costs can't by definition be recovered, doesn't that mean we need to rethink risk? After all, making future decisions based on past Sunk Costs guarantees we get mired in our current circumstances. And if those circumstances don't align with our future objectives, stagnation is a risky proposition. Knowing when it's smart to stick and when it's time to quit is not an easy decision.
Persistence is a worthy attribute, but blindly persisting in pursuit of the wrong objectives leads to nothing but discontent. As Warren Buffett once said, quote, the most important thing to do if you find yourself in a hole is to stop digging, end quote. Do you want something else, something new, something different? Your gut instinct might be urging you to move in a different direction, but Sunk Costs may be keeping you anchored to the present.
Moving forward requires us to move past Sunk Costs. Here's how Seth Godin puts it, quote, everything you own, all the clothing in your closet, your academic achievements, and beyond is simply a gift. It is a gift that your past self is giving to your present self, and it's up to you to decide whether you want that gift today. It's as simple as that.
You owe your past self nothing other than the consideration of whether these gifts are helpful in the here and now, end quote. Sunk Costs are a gift. You can part with them if you want, and if you want change, then say farewell. You just listen to the post titled, Say Farewell to Sunk Costs by J Harrington of LifeAndWim.com.
If they get a J, Sunk Costs and what we talked about in this article relate to many different things we've talked about in this show, like the marshmallow experiment comes to mind where kids had to choose whether they wanted a marshmallow now or wait like 15 minutes or an hour or something and get something like double the marshmallows. I'm probably getting it wrong, but you get the idea. And the ones who waited actually performed better in life later on. It's really interesting.
It's difficult to stop watching a movie once you've started or actually walk out of a movie theater. I've only done it once because we paid for it. So we might as well see it, right? But it's a really bad movie.
Not only did we waste the money on the movie ticket, which is gone no matter what, but now we're wasting maybe an hour and a half extra if we stayed instead of leaving, which if you make let's say $25 an hour, that's basically like throwing away nearly $40 of your time on top of the movie ticket. And for what? It's important to think about where we're making these choices in our own lives and how we're sticking with something just because when in fact it's actually hurting us, it applies to many different areas of life, including relationships. Something to think about is we head into 2022 crazy that's already here.
I greatly appreciate you being around for this year through all the tough times, but also the good times. I hope this podcast has been able to contribute to your happiness this year and will next year too. And if it has, sharing this podcast with someone else really goes a long way, whether that's in person and actually showing them on your device and subscribing them to the podcast, or even online, like in groups or wherever, it really means a lot goes a long way, like I said. So thank you for that.
You being here has kept me going. Have a happy and safe new year, and I'll see you tomorrow in 2022. We're optimal life. Oh, wait.