Are You Sabotaging Yourself With The The Sunk Cost Fallacy? Read On To Find Out...
In business, in fitness, in life in general knowing when to pivot, change your directional path and cut your losses is imperative.
Continuing on the same path when you're seeing no progress, deriving no value or attaining no happiness is the definition of insanity.
[bctt tweet="Insanity: doing the same thing over and over again and expecting different results. - Einstein" username="ignorelimitscom"]
Unfortunately making these changes and cutting losses is often far harder than we anticipate.
This is thanks to the sunk cost fallacy...
"SJ, what even is a sunk cost? Isn't that a business term?"
You're right, a 'sunk cost' is a economic term for money that has been spent and can no longer be recovered.
- Buying new equipment for your gym is a sunk cost
- Paying a contractor to design your new website is a sunk cost
- Buying tickets to a entrepreneurship conference is a sunk cost
These costs are sunk, the money is gone and you or your business has received X in return for it.
But that's where the sunk cost ends and the fallacy comes into play.
Without realizing it we often make decisions based on our sunk costs, the funds or resources (time & effort) we've already spent as we see it as an irrational decision to abandon or too hard to get out of, even when it's far from what we want.
This often results in self sabotage.
[bctt tweet="We make poor decisions because we don't want to lose out on what we've already spent (time/money/effort)." username="ignorelimitscom"]
Think about it...
A loss is a loss, the sooner you recognize you're on the wrong path it's time to cut it loose.
- It's easier to abandon a business after investing $100 and 1 month of your time than it is when you've invested $10,000 and 3 years.
- It's easier to break away from a bad relationship after 1 month of dating than it is when you've invested 1 year.
- It's easier to fire your broscience personal trainer after 1 session than it is after 10 sessions
Don't allow the sunk cost fallacy to manipulate your emotions and convince you to carry on investing because you've already spent too much.
You and I both know one day you're going to have to pull the trigger when you're on the wrong path.
The longer you wait the harder it becomes.
Are You Falling Victim To These Common Examples Of The Sunk Cost Fallacy?
"I may as well continue performing this workout routine, I've been doing it for a year"
You've invested a few hundred dollars having an IFBB Pro write you up a workout regime, you've been following it for 12 months and have seem little if any progress.
Instead of altering routines to a basic, proven workout regime for natural gym-goers that won't cost you a penny such as the StrongLifts 5x5 regime you continue to slug away with your expensive, poorly programmed regime because you would see both the time and money as a complete write off if you switched regimes.
"I may as well keep building this business even though I've had no customers thus far"
In online business it's imperative you know when to pivot.
Analytics don't lie, conversion rates don't lie, click through rates don't lie.
There's no longer any guess-work.
If you've spent $1000 and a year building an online business that's in the wrong niche that you've determined is destined for failure and you KNOW you need to alter your path to gain traction but don't that's another prime example of the sunk cost fallacy.
"I may as well keep reading this awful book, it cost me too much to abandon"
You're 50 pages into a book or 20 minutes into a movie and it's not getting any better.
Instead of calling a quits and finding a better book or movie you continue reading away in disgust until the very end.
You waste time, you don't enjoy yourself and you miss out on the opportunity of a better book or movie.
You become too emotionally invested in the outlay, in the cost to logically cut it short and pivot.
The Sunk Cost Fallacy Is Costing You More Than You Think
The sunk cost fallacy is not only hurting your happiness and your finances, it's taking away the most important thing of all.
Opportunity cost is often forgotten.
Because you're doing X you can't do Y.
Don't spend your time following through with a sunk cost purely out of emotion.