In life, we often dwell on the past to avoid the negative emotions of loss and choose to behave in an irrational way. The famous psychology blog “you are not so smart” (you are not so smart) tells you that this is the “sunk cost fallacy”.
Embracing the future or making up for losses?
“Sunk costs” is one of the most interesting topics for economists. Simply put, sunk costs are payments, investments, etc., that have been made and are not recoverable. A robot with complete, sound logic would never take sunk costs into account when making choices, but you would. As an emotional person, your aversion to loss can lead you into the trap of sunk costs.
Loss aversion is a major motivator for humans. After you have identified a loss, it will linger in your mind; when you think about it again, you will find it even heavier than before. Yet by holding on to the past while deciding on the future, you are in danger of the sunk cost fallacy.
Hal Arkes, a professor in the Department of Psychology at Ohio State University, and Catehrine Blumer of the University of Liverpool conducted an experiment back in 1985 that demonstrated how foolish people can be in the face of sunk costs. They had the subjects assume they had paid $100 for a ticket to a Michigan ski trip, but after that found a better Wisconsin ski trip — for $50 — and bought a ticket for it, too. The researchers then asked the subjects to assume that the two trips ran into each other, and that neither ticket was refundable or transferable. How do you think they would choose it? Is the choice of $100 that “good” travel, or $50 that “excellent” travel?
In the experiment, half of the people chose to go on the former – the more expensive trip. While it may not be as much fun as the latter, there is more to lose by not going on it. Yet that’s a fallacy! Because you can’t get back the money you spent anyway. This fallacy prevents you from realizing that the best choice is to bring you a better experience in the future, not to make up for what you lost in the past.
Who Moved My Mental Account?
Kahneman and Tversky also did an experiment to prove the sunk cost fallacy. Now let’s look at this.
Suppose you are going to see a movie with a ticket worth $10. When you open your wallet, you find that you are short a $10 bill. So, would you still buy a movie ticket? You probably would. In the experiment, only 12 percent of people said they wouldn’t.
Now, let’s say you were still going to see a movie with $10 worth of tickets, but were in the middle of pulling out your ticket when you realized you’d lost it. So, would you go back and buy a new ticket? Maybe you would, but it would probably cause you a lot of heartache. In the experiment, 54% of people said they wouldn’t buy a new ticket. The two scenarios are actually identical: you lose $10 and then have to pay another $10 to see a movie. But the two give different feelings. In the second scenario, the money seems to have been given a specific purpose, and then it’s lost – which is even more annoying. That’s what makes “Happy Farm” so obsessive that people swipe it at work.
How did you become addicted to Happy Farm?
“Happy Farms is a tool that allows you to understand your vulnerabilities in the face of loss. The sunk cost fallacy is the engine of Happy Farm – and the developers of Happy Farm know it.
“Happy Farm is a free game on Facebook. After you log in for the first time, you will find yourself “in” a virtual world of grass. You will see a young farmer who is eager to work but has nothing to do. You control his or her will and actions. At this point, his or her world is still empty, there is plenty of land to plow, and there is a ripe, ready-to-pick vegetable growing in the ground.
After you start the game, you get the feeling that the game designers, while trying to catch your eye, are doing so unobtrusively, as if all the choices are in your hands – they seem to be saying that no one is forcing you to do anything. “Look here, come and pick these beans!” “Hey, want to come and plant something?” “Look, you can plow the ground!” …… Sure, if you want. Then you see a progress bar; one that is rapidly filling up as your messy-haired, dusty little farmer goes about his business. The background music is like a haphazard, mechanical pastiche of Old West American pianist tunes, playing nonstop, endlessly, and it’s hard to tell where it started.
In just a few minutes, you’ve done all you can do at this stage. But then many more cues pop up in the corners of the screen telling you that you want not a small garden, but a large farm the size of a Texas ranch with all the amenities. So you need to take good care of your crops. Once you know you’ll have to wait at least another hour to harvest, you’ll start going around and soon you’ll find you have some virtual currency that can be used to buy trees, shrubs, seeds, impressive virtual animals, clothes, machinery, buildings and props. At the beginning of the game, you happen to have enough “money” on hand to buy a “caramel apple tree” or a swarm of bees; but if you want to get something nice, like a “pink tractor ” or “magic waterfall”, you will have to play some more time. If you’re so inclined, you’ll log in repeatedly throughout the day to see how long it will take for your strawberries to ripen, or if stray animals come to your feed trough to feed …… You’ll be rewarded with more virtual currency, level up and unlock more props as a result. To advance, you need to plow, plant and harvest, one without the other. These actions are like investments and you will want to get a return on them later. . That’s the dark hand behind Happy Farm. To play Happy Farm is to run a virtual farm. If you neglect it, you will incur bad consequences. If you don’t check back often, your crops will die, and you’ll feel that everything you did for them before was a waste of time, money and effort. So you must come back often, perhaps a few days apart, to reap the fruits of the time and money (virtual currency) you’ve lost in exchange. If you don’t, you’re not just not going to reap the harvest, you’re going to lose your investment.
If you want to take away the bad feeling of loss, you can pay (real money) to Happy Farm or accept services from its advertisers that can turn things around – such as bringing crops back from the dead or speeding up their growth. You can also ask your friends to help take care of your farm.
While all of these tactics can keep the sunk cost fallacy from bothering you for a few days, they also contribute to it. The bigger your investment, the more you ask for help, and the longer you think about it, the more you will want to keep the farm going and flourishing. People often do pretty crazy things to keep the farm going – like setting an alarm clock to wake them up in the middle of the night …… Your purpose in playing Happy Farm is no longer to entertain, but to avoid negative emotions. Instead of crops, you harvest your sunk cost fallacy. You’re forced to return to the game and tinker instead of doing something that might be more fun – because you feel you’ve wasted something you can’t get back.
To say that Happy Farm is just a successful game would be a huge understatement – it has led to and pioneered a new form of entertainment. These social networking games have generated hundreds of millions of dollars in value. They are like any other high-margin product: someone is always making money from the predictable weaknesses in your behavior.
“Players of Happy Farm are in a sunk cost bind. They can no longer recover the time and money they spent. But they continue to play the game to avoid the pain of loss and waste.
The Ubiquitous Sunk Cost Fallacy
Maybe you don’t play Happy Farm, but you’ve probably been in a similar situation in your life. For example, you wanted to change your major, quit your job, or end a bad relationship. But you didn’t; you went on, putting up with your major, your job, and your bad relationship, not because they gave you a good life experience, but simply because you had invested too much time, experience, money, or whatever, and you wanted to avoid the negative emotions that losing them would bring.
But imagine a scenario where you slip up on a cruise ship and drop your phone overboard, where it sinks below sea level and only James Cameron’s unmanned submarine fleet can find it. Sure, you could spend some money (okay, a lot of money) to hire the unmanned submarine fleet to retrieve your phone, but you wouldn’t do such a stupid thing and waste more money for something that’s already wasted for nothing. If that’s how you feel, then you can be proud of yourself for being a reasonable person!
But unfortunately, the sunk cost fallacy in life in general is not so obvious. At the time you lose something, you probably don’t realize that you’ve lost it forever. The “past” is not as clearly identifiable as sea level, but it is as untraceable as the latter. It is important to know that what has passed cannot be returned in any way.
Sunk costs don’t just affect our lives, they can even provoke wars, raise auction prices, or keep failed policies alive. The sunk cost fallacy keeps you going after you’ve eaten. It fills your house with useless stuff you’ll never need. Every “yard sale” is a funeral for someone’s sunk costs.
The sunk cost fallacy is sometimes referred to as the “Concorde fallacy” or “Concorde effect,” where “Concorde” refers to that first The Concorde fallacy refers to the first commercial supersonic airliner, the Concorde. The Concorde project was a failure from the start, but all those involved in the project (mainly the British and French governments) insisted on injecting money into it anyway. Their co-investment put heavy shackles on themselves and prevented them from jumping in to make better investments. After losing so much money, manpower and time, the investors did not want to give up so easily.
Yet this persistence, this persistence, this expectation of continuity, is not something bad, but a noble, unique quality that humans develop later in life. Studies have shown that lower animals and infantile children do not commit the sunk cost fallacy. Wasps, worms, rats, raccoons, and infants …… don’t care how much they invest or how much they lose. They can only see direct losses and direct gains. But as a mature person, you have the gift of reflection and regret. You can anticipate that you will eventually realize that your efforts were futile, that your losses are permanent, and that once you accept the fact that it hurts …… to be able to anticipate it, it’s not too bad, it’s a turnaround.
Recent Comments