Eiffel Over

Tag: SunkCostFallacy

  • When the joke isn’t funny anymore

    I’ve been writing this week about when is and isn’t a good time to optimise. And also about the way a street theatre clown uses feedback to keep them close to their goal of making the audience laugh. 

    Well, the clown has another trick up their sleeve, which I learnt from clowning teacher Holly Stoppit, which is called the Drop. 

    Usually a clown can whip up an audience into a frenzy of laughter by doing silly, unexpected things on stage. They will find a gesture or a game that gets the laughs rolling. But then usually, at some point, the joke will stop being funny. The tide turns quickly, and the audience isn’t laughing anymore. 

    This is when the clown should use the Drop. They simply forget all about what they were doing and invent something new. The surprise keeps the audience engaged. It reanimates the clown, giving them a new creative opportunity. It reconnects the clown and their congregation. And the game of improvised laughter-making starts again.

    The reason the clown can do this is they have no resistance to changing the plan. Few deeply held plans about how the session is going to go. Few carefully created props that wouldn’t get used if they took the show in a different direction. And critically, no ego.

    With none of this baggage, the clown is freed of sunk-cost fallacy. Sunk-cost fallacy is the often-held belief that we must continue doing the same things as before because we have invested so much in our existing ways of doing things, even if in the long run changing plans would lead to better overall outcomes. 

    One of the reasons we continue to do the same thing as before rather than change approach is because we feel we have so much invested in the status quo. It could be investment in physical infrastructure or personnel. It could be more personal than that and be an issue of reputation. Or a fear of challenging the powers that be.

    But if the approach we usually take is no longer working for the system, we need to have the confidence to drop and explore something new. Because when the audience stops laughing, the joke isn’t funny anymore. 

  • Beware of sunk-cost fallacy

    I suffer from sunk-cost fallacy. This is the phenomenon whereby you remain committed to a previous choice because of what you have ’sunk’ or invested in it, even though new evidence suggests a different option would cost you less.

    It shows up for me when I have made a plan to do something, and then plans change, for example when travelling or making plans for the weekend. I remain psychologically committed to the original plan even though it might not make sense any more. I suffer from sunk-cost fallacy because I am a human, and this is a common bias that we suffer. 

    Sunk-cost fallacy also shows up in design. It is when we remain committed to one option which we have invested time, resource and psychological energy in, even when a better answer emerges. If our priority is to get our job done, then making decisions purely on the basis of sunk costs might be sensible. But if our priority is getting the right design, then the sunk-cost is a poor guide, as it fails to account for the total cost of having the wrong answer. 

    Where money is concerned the distraction is how much you have already spent, when the real concern should be how much you still have to spend. For major projects, where we routinely, systematically underestimate the future costs, the risk of sunk-cost fallacy affecting judgement is even greater. 

    Whether we are making plans for the weekend or plans for a new railway, look out for sunk-cost fallacy!