One Simple Economic Mistake Everyone Makes, and How You Can Avoid It

Have you ever found yourself finishing a dessert, even when you were already overfull (and you didn’t even like it that much?)  Did you ever find yourself finishing a television series, even after it had jumped the shark?*  Than you, my friend, are suffering from a nasty case of Sunk Cost Fallacy.

Sunk Cost Fallacy

Here’s how Sunk Cost Fallacy works.  Let’s say you’re playing the ridiculously addictive Facebook game, Farmville.**  You’ve already watered your ridiculous virtual garden and nurtured your virtual livestock, and wasted your real money on virtual whatnot.  The second your expected future benefit becomes less that your costs, you should just ditch it, right?  That would be that rational thing to do.  But we’re not so smart as that.


You see, people (yours truly included) get attached to things we’ve invested in.  Once you’ve spent two or three days fluffing your virtual tomatoes and plumping your swine, then you start to become committed.  You care whether or not your pretend chickens lay virtual eggs.  You’ve invested all that time, wouldn’t it be awful to have it all fall to pieces just because you didn’t log in for a few hours and click a couple of buttons?  So you log in and click.  But, of course, you’ve only dug yourself in deeper.  Now if you neglect your farm then you will have lost all the previous time as well as that last time you logged in.  Before you know it, you’re loosing more and more time to make sure you don’t lose the results from previous effort.  It becomes a vicious cycle.


How do you escape?  The simple realization that, no matter what you do now, you’ve already spent your time.  Investing more effort into a virtual plot of land won’t save your previous investment.  Instead, it will eat up your future investment.  Of course, since people hate loss more than we love gain, acting rationally requires that we overcome our natural inclinations.

Think of it this way: you’ve already spent the time, there’s no way to get the time back.  Therefore, disregard the time you’ve already put into it and concern yourself with the future expectations.

Applying this awareness isn’t so easy.  It take a lot of mindfulness, since it’s not a natural action.  But I’m sure that, with practice, we can learn to overcome our irrational urges and make more rational decisions.  Now, if you’ll excuse me, I need to log in to World of Warcraft.  I have a paladin on level 42 that needs to level up.***

*Before I give you the link, I want you to understand that the website I’m linking to is so captivatingly, interestingly content-packed that it will consume the next four to five hours of your life, and you very soul, if you let it.  Think of it as the heroin of websites.  If you can’t handle that, then just google or wikipedia “Jumping the Shark.”  If you think you have the strength to escape, then visit the excellent summary on

** No, I’m not linking there, I don’t want to dirty my cursor.  But I’m willing to google it for you.

*** Oh, for Pete’s sake, I’m kidding!  Because, seriously, who would play a human paladin to 42 when they could play as a Night Elf Mage?

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