Sunk cost is an incurred and unrecoverable cost. This often leads the “spender” to continue investing in something, even though it is bringing little to no benefit. A common phrase that describes sunk cost, is throwing good money after bad. For example, buying a ticket and staying because you already spent the money. In this situation the buyer is wasting two currencies, the money for the ticket as well as the time watching. However, people tend to stay because they don’t want to waste the tangible currency they spent on the tickets. This is the sunk cost fallacy, which comes from behavioral economics. Sunk Cost is seen as a hindrance to progress, because it generally applies to the tail end of an action. When used at the beginning of a process it can become an excellent way to get started with something new.
Sunk cost allows us to make things sticky, or to create friction with a process. Increases in the resources, makes people more likely to keep at a specific habit or process. Friction is interesting because it works differently in a micro and macro sense. In a micro sense, friction slows us from doing things but in a macro sense it makes it easier to continue.
When people start going to a gym they are more likely to continue going if they feel involved in a community. This is why fitness organizations that promote a lifestyle, like CrossFit, have higher retention rates. In this situation higher friction keeps one involved over a longer period of time. In the micro situations increased friction decreases adherence. For example, studies show that if you pack a gym bag to work you are more likely to work out than if you must go home before the gym. As you can imagine the general trick seems to be, reduce friction in the micro and increase it in the macro.
How I used Sunk Cost as a Tool
I have always been an avid reader and I read enough I suddenly wanted to write. A few months ago realized I wanted to refine my ability to tell stories that resonate. Writing had become something I had a growing desire for. Eventually I settled on creating a website where I could write about things that interested me. Interestingly enough, I used a similar strategy when I reduced my possessions down to one bag.
Once I decided I was going to begin writing, I knew that only a fixed amount of time remained until my interest and motivation would disappear forever. This is where I used sunk cost as a tool to pursue an interest. Immediately I went and bought a domain name, sunk cost $12 per year. Ok, good start but not enough to keep me invested. Next I went and looked into how I could host my site. Two options, build it myself or use a service. If I built it myself I would have a very large sunk cost in terms of time. However that cost wouldn’t have been in the area that I wanted to practice; writing English instead of code. So instead I went with WordPress, which after configuration cost about 60 dollars per year along with about an hour of time. Now, I had gotten to the point that I was almost dedicated to the idea.
Finally, I started writing. I spent time writing about ten blog posts that ranged in topic across various interests. This is where I found the idea of sunk cost as a tool to be most effective. I had ten “published posts” that anyone could go read, so I felt like I wasn’t starting from zero. The most critical time, the beginning, became significantly easier because of how much effort had already gone into the idea.
How it worked
The process of getting the website up and running took about three days. It provided me with enough skin in the game to continuously pursue writing. I’ve often struggled staying on track with projects. Ultimately this a framework that works well for getting started and giving you a reason to start. By no means an alternative to discipline. Writing every week has been fucking hard, and more often than not I’ve struggled to get pieces out when I want to. However, by having a backlog of public posts and an established website it has become easier to keep going.
For me this is an effective tool to make discipline a bit easier to maintain. By reducing friction in the micro and increasing it in the macro I found a repeatable method to keep myself going on the small projects that I always end up starting.
2 replies on “Sunk Cost as a Tool”
well explained and easy to comprehend
I agree! Utilizing the “Sunk Cost” method as an investigative-evaluation, is a remarkable tool to move, include and eliminate…