People Are Not So Rational


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It is largely agreed that no one should commit to something that is shown to fail, but the human brain is often irrational. When people find endeavors to be promising, they will invest their time or money in the success of the project. That irretrievable investment is called a sunk cost. If the project were doomed to fail, then the sunk costs will influence the faith put into the failing project. This blind confidence is called the sunk cost fallacy. The sunk cost fallacy is a bias in decision making where one may invest more time or money into something they have previously invested in. 

This phenomenon can be seen in the real world and has been tested multiple times. Doctor Nidthida Lin and her team conducted a study regarding the rationale behind the decisions of entrepreneurs, and they found that sunk costs can be an important factor. Sunk costs have a significant impact on the decision to persist because entrepreneurs feel the sunk costs are too valuable. Dean A. Shepherd reasoned that underperforming businesses persisted predominantly because of the money invested in the venture. For the same reason, entrepreneurs consider the money spent on the venture too valuable to simply give up on.

The money provides a false belief that with more investment, the business will succeed. 

The roots of this strange occurrence can be traced back to the history of humankind.  Humanity can be a very persistent species. Our ancestors used the persistence hunting technique, where a hunter would endure long-distance running to wear out the prey. These strategies allowed them to overcome the disadvantage of their slow speed. From then, the mentality of never giving up was born for humans and integrated as part of the human race. However, in the modern world, there is no need to hunt for food anymore. So when a person has used materials in attempting to gain something they desire, they will value those materials, similarly to how valuing time benefitted ancient humans.

It is evident that the sunk cost fallacy could be potentially negative. However, the effect could be much nearer than one would think. People often keep pieces of clothing or random items lying around because of the money they used to buy them. Those items go unused for years, wasting space in their rooms. Many long-term couples also stay with each other long after they fall disillusioned with their partner. They believe it is not worth it to cut ties after investing so much time in the relationship. Although unwilling to, we end up sticking to endeavors that we feel attached to over time. These problems leave people wondering if there are any ways they can eliminate the sunk cost fallacy. One of the ways to avoid this effect would be to rely on trusted friends and family. Make sure to ask them frequently for any kind of advice, whether for a relationship or business. You must also learn how to repress the negative emotion of abandoning something you previously committed to. You can start by throwing away objects that you have been hoarding, and cutting any relationships that are hanging on loose threads.

The advancement of humanity does not only mean the advancement of technology, but also the advancement of the mind. Although the human mind may seem incredible, the sunk cost fallacy is evidence that humans are not always so calculating and intelligent. So when feeling in control, double-check that your mind is not making you feel rational. This way, you can strengthen your mind as much as possible.

Aaron Choi

ISK TIMES - Journalist

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