There’s a concept I learned in business school that’s really useful to keep in mind - it’s called Sunk Costs. If that sounds familiar, boring or uninteresting, stick with me a bit -it might be useful one day and I’m going to talk about burritos.
‘Sunk Cost’ is an economics term for a bit that’s used to help figure out the potential value of an investment or project Or more accurately to figure out whether the next thing is worth doing.
It refers to money you’ve spent, that you cannot in any way, get back - ever.
So the car you bought 10 years ago, is not a sunk cost. Because you can (after scraping, scrubbing and finally buying the GooGone and toxically melting off those embarrassing stickers that are the last vestiges of the enthusiasms of youth... what? your car is different?) sell your POS and recover some of that money.
But the burrito you bought 10 minutes ago... That’s pretty much a sunk cost.
How is this useful?
A Sunk Cost should in no way be considered when making a decision about future costs. Buying the burrito does not, in itself, constitute a good reason to eat the burrito.
This looks a little different when the thing you bought is something like a graduate degree. Also, most of what we spend isn’t money - it’s time, energy, reputation, heartache, conflict, emotion, love...)
The idea of sunk cost helps us by working directly opposite the force of cognitive dissonance. Cognitive Dissonance is the discomfort we feel when we simultaneously hold two contradictory beliefs. (such as “That is an awesome burrito, the product of the best taqueria in existance and it is work of art for all time” and “I want to lose weight and I’m not actually that hungry right now”) and are then challenged by some situation or circumstance that exacerbates this tension (such as accidentally and not on purpose purchasing the aforementioned burrito).
In these circumstances what human beings do, is change one of their beliefs.
“Screw the diet! Eating this burrito is an awesome idea! And it’s getting cold so...”
And you thought beliefs were so solid and reliable. A great example of this is before and after buying a car.
Before buying a car your friend is doing the research, going to car lots, driving a bunch of cars, putting up with icky salespeople and getting very tired. “Which car are you going to buy?” you innocently ask.
“I’m not sure,” says your friend, “The Toyota and Honda are both pretty good and pretty much the same... it’s kinda 50/50.” They finally get tired of all the run around and trying to weigh all the different little bits against each other, and buy the Toyota.
“You went with the Toyota, huh?” you again innocently ask.
“Oh my god! I’m so glad I did” they gush, “It’s sooo much better than the Honda! It... blah blah blah”
....but yesterday you were saying...?
Sound familiar? That is the mutability of belief. And it is a lot more pernicious and pervasive than the choice between Hondas and Toyotas (though really... is there even a choice? I mean my God! The Toyota is sooo... oh - oops).
The way this works is that first I believe I am a smart guy and I’m trying to figure this thing out. I have to buy one of these things, and they cost a lot of money. I don’t really know which one is better or what to believe is right, so the possibility is that I’ve just spent a lot of money on the wrong choice and I’m really an idiot.
Better to change the other belief and “KNOW” I made the right choice. That way I can still believe I’m a smart guy and I don’t have to feel that tension anymore.
It happens all the time and can change the most ‘deeply held’ beliefs. For instance, look who is supporting the current occupant of the White House.
Republican hard-liners are now saying multiple, secret, undocumented meetings with Russian spies, oligarchs, diplomats and Putin himself is no big deal? Really? That doesn’t sound like the republican party, does it?
If you were (or are) a Trump supporter, can you imagine how big of an idiot you would have to be willing to feel like, to PERMIT the thought that he is compromised by and colluding with Russia?
And each time a new conflict in these beliefs arises, each new revelation, scandal, corruption, incompetence, crass awfulness, each and every time the supporter has to choose again to change one belief (e.g. ‘tweeting misspelled insults inciting violence on journalists is unpresidential’) and strengthen the other (e.g. Trump must be great or I’d be an idiot to have stuck with him this far). So with every new extremity and obscenity, those who support him BELIEVE MORE STRONGLY than before.
This is the actual battle that is being fought. On its face it is ridiculous beyond believing to assert that the present administration in any way does justice to the office or this nation. It is so obviously wrong as to be indefensible.
Yet here we are, a divided country, arguing about our support for THAT man.
I can see being divided in arguing about supporting Jesus... or maybe Taylor Swift...
But Donald Trump?
So back to the burrito. There’s a story that I heard (that I haven’t been able to verify! I so hope this isn’t apocryphal, but it might be) about Steven Spielberg during the making of Indiana Jones and the Temple of Doom. (That’s the second one, where Kate Capshaw screeched like fingernails on a chalkboard for like, 90 minutes). Apparently Spielberg wanted to do a very expensive special effect, so he went to his producer and asked for $2MM for this shot (in 1984 dollars that’s like... a bazillion dollars). It took place in a chase scene in a mine, which resembled a long roller coaster ride with terrorists. The effect happens when they go around a wide turn and the cart thingy they’re in precariously lifts up on two wheels for a bit.
It lasts about two seconds.
When the producer watched the dailies with Spielberg and the effect came and went, he turned to him irate and said, “That’s it? Two seconds?! Where’s my $2 million dollars!!”
Spielberg calmly replied, “Just because I spent the money doesn’t mean I’m going to ruin my movie with it.”
That is Sunk Cost.
There is such freedom in this! Think of the all things you’ve done, decisions you’ve made, money you’ve spent, time you’ve invested, heartache, conflict, reputation... none of it - NONE OF IT, need confine what you do next. You are actually,and totally free. So whatever past decision, statement, stand, or investment you feel beholden to...
Don’t ruin your movie with it.
And if you happen to be able to share this idea with someone who has invested a lot of time, words, ego, reputation and emotion into supporting... well, you know. Please tell them the Spielberg story. (I’m almost sure it’s true.)