Why we keep spending on things that fail

HostI was looking at my old boots the other day. The soles are coming off and the leather is cracked. I have spent more money trying to fix them this year than a brand new pair would cost at the store. I know it's a bad deal, but I just can't seem to let them go. Why do we do that? Why do we keep throwing good money after things that are clearly broken?

GuestIt's a common trap we all fall into. We have this weird glitch in our heads where we think the money or time we already spent should decide what we do next. In the world of money and big business, people call it the sunk cost trap. The idea is that once you put something into a project, whether it's cash or just your own hard work, you feel like you have to keep going to make that first bit of work count for something. If you stop now, it feels like you're admitting you failed. Our brains hate that feeling. They hate it so much that they would rather waste even more money just to avoid the sting of walking away.

HostBut it feels like I'm just being a person who finishes what he starts. I mean, if I quit every time something got a bit pricey or a bit tough, I would never get anything done. There has to be a line between being smart and just being a quitter.

GuestThat's exactly how the trap catches you. You tell yourself you're being tough or staying the course. But here is the trick. The money you spent on those boots is gone. It's at the bottom of a lake. Whether you spend another fifty dollars today or not, that first hundred dollars is never coming back. So the only real question you should ask is what's the best thing to do with your money right now? If the best move today is to buy new boots, then that's what you should do. But we don't look forward. We look backward. We think about the ghost of the money we already spent, and we let that ghost tell us what to do with the cash still in our pockets.

HostSo it's like sitting through a movie that you hate. You're thirty minutes in, you know it's bad, but you stay because you paid twenty bucks for the ticket.

GuestRight. But the twenty bucks is gone the second you hand it to the person at the front. You can either spend the next two hours being bored and annoyed, or you can go for a walk and enjoy your night. Staying in the seat doesn't get your money back. It just steals your time too. It's like you're punishing yourself twice. First you lost the money, and now you're losing your afternoon. We do this with big things too. Look at how governments build giant planes or bridges. Sometimes they realize halfway through that the project is a disaster. It's going to cost way more than they thought and it might not even work. But they keep pouring billions into it because they don't want to tell the public that the first billion was a waste. They would rather waste ten billion than admit the first one is gone.

HostI hear you, but it's hard to just turn off that feeling. It feels almost physical, like a weight in your chest when you think about walking away. Is there a reason our brains are so stuck on this?

GuestIt mostly comes down to how much we hate losing. Scientists have found that the pain we feel when we lose ten dollars is much stronger than the joy we feel when we find ten dollars. We're built to protect what we have at all costs. To our brains, stopping a project or throwing away those boots feels like a loss. As long as you're still trying to fix the boots, the loss isn't real yet. It's still a work in progress. The moment you put them in the trash, the loss becomes real. It's a fact. Our brains will do almost anything to delay that moment of truth, even if it costs us more in the long run.

HostWait, so if I just keep the boots in the closet and never wear them, am I still stuck in the trap?

GuestActually, yeah. You're still giving up the space in your closet to a ghost. You're holding onto the hope that the money wasn't wasted. It's a way of lying to yourself so you don't have to feel that sharp poke of regret. We do it in relationships too. People stay in a job they hate or a friendship that has gone sour because they have ten years put into it. They say, I can't leave now, I have put so much of my life into this. But they're not thinking about the next ten years. They're only thinking about the ten years that are already over and done with.

HostThat sounds like a tough way to live, always looking in the rearview mirror. Can we ever actually learn to ignore that feeling, or are we just stuck with it?

GuestIt's very hard to ignore because it's so deep in us. But some researchers found something really interesting when they looked at animals. They tested pigeons and rats to see if they would fall for the same trap. If a bird has to peck a light a hundred times to get food, and then the rules change so that light stops working, the bird just moves on. It doesn't think, well, I have already pecked this thing fifty times, I might as well keep going. It just looks for a new way to get food. Animals live in the now. Only humans seem to have this special ability to worry so much about the past that we ruin our own future.

HostThose old boots are still sitting in my closet for no good reason. We keep looking at what we have already lost instead of the walk we could be taking in a new pair.