How to Have a Good Day: Harness the Power of Behavioral Science to Transform Your Working Life pdfdrive com

DITCH YOUR SUNK COSTS
It was a relief for Bartek to realize that he could reverse his decision and
downscale—but he did have one more psychological barrier to overcome in
making that decision, which was kissing goodbye to the money he’d already
spent on expanding capacity. He knew he needed to move on, but it was
tempting to throw good money after bad, hoping that business would improve. It
wasn’t all that easy for him to let go. As he says, “Downscaling was a really
tough decision to make, because we’d invested so much. 
I’d
invested so much.”
And it’s not just Bartek. It’s generally hard for any of us to walk away from
all the time, effort, or money we’ve already sunk into a situa tion that has little
prospect of improving. You’ll recognize this if you’ve ever decided to keep
watching a terrible movie because you tell yourself “I’ve already paid for the
ticket” or “I’ve already given it half an hour,” despite the fact that you’d have

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been happier if you’d walked out and saved yourself another hour of boredom.
Professionally, maybe you have a dysfunctional project (or relationship) that
you’ve been trying to turn around for a while. You sense that life would be better
if you gracefully wrapped things up, but you don’t want to quit because you’ve
already put so much energy into trying to make it work. This difficulty in letting
go of bad investments of time, energy, or money is such a human universal that
economists even have a name for it—the 
sunk cost fallacy
. We struggle with the
prospect of losing those past sunk costs, even though we stand to gain more if
we change course.
7
So let’s suppose you’re dealing with a situation that’s not going well. Perhaps
it’s the result of an earlier decision you made. How do you decide whether to
stick with it or change tack and move on? Investment analysts and behavioral
scientists wholeheartedly agree on what you should do. In short, you should:
Imagine you’re starting entirely afresh from where you are, as if all past
events and outlays have been wiped off the slate.
What are the likely future costs and benefits of investing further time, effort,
or money in this situation?
What are the likely future costs and benefits of extracting yourself from this
situation?
Compare the two, and ask yourself: should you stay or should you go?
As you compare the pros and cons of carrying on versus walking away, you
can include any reputational or relationship costs that may be involved in
extracting yourself from your commitment. But you should ignore 
past
investments of time, effort, or money. As long as you’re living in a world where
time moves forward and not back, those past costs are sunk and gone.
If this still feels counterintuitive, psychologists have found that people are
better able to think clearly about sunk costs if they make sure to pay close
attention to the benefits of moving on.
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Our natural tendency is to zoom in on
our sense of loss—that’s what economists call 
loss aversion
—and ignore the
benefits of letting something go. For Bartek, that meant it was hard for him not
to focus on the ill-fated cash he’d spent on leasing extra trucks and buying
vegetables, as well as the damage to his pride. But removing the extra

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production capacity was going to yield huge benefits. It would stop his company
hemorrhaging five-figure sums each day, and would improve morale and
productivity at a stroke. And once he thought about that, the idea of reversing his
decisions felt a lot better.
Finally, if you’re dealing with a situation where there aren’t clear financial
benefits to cutting your losses, it can be helpful to look at mistakes as useful
experiments that will pay dividends in terms of life experience. That gives you a
clear benefit to carry into the future: valuable knowledge about ways to handle
similar situations if they ever arise again.