I’ve always been amused by the Berlitz commercial featuring the well-meaning but English-challenged trainee within the German Coast Guard:
Intercom: “Mayday Mayday –static– Hello can you hear us can you hear us can you –static– over –static– we are sinking we are sink–”
German Coast Guard (slowly, in very thick accent): “Hallo? This is the German Coast Guard.”
Intercom (insistently): “We are sinking! We’re sinking!”
German Coast Guard: “What are you … sinking about?”
A few weeks ago I was tutoring a lady in some concepts of financial management, and we got to the topic of sunk cost. Sunk costs are past expenses that can no longer be recovered. They’re “sunk,” as in “sleeping with the fishes.”
Seeing that what you’re doing is a losing battle can be tough. Even if you do see that it’s a losing battle, it’s even tougher to walk away.
Take Henry Gribbohm. He went through $2,600 playing carnival games in an ultimately futile attempt to get an Xbox Kinect. (The carnival did make the sunk cost sting a little less; he got back $600 and a giant plush banana. He still filed a report with the police department, though. This astounds me; the carnival owed him nothing.)
Or those arcade games where you drop in tokens to try to get a whole bunch of them to fall over the edge? Chuck E. Cheese has these. So does Great Wolf Lodge. (At least if you get discount tokens off of eBay it’s cheaper fun.) Having played these games before, I understand the pull to do just one more because it’s so close. Very easy and very tempting to add to a sunk cost.
But let’s move away from games of chance. What about investing? What about doubling down when a stock drops 50%? If you’re not absolutely sure of why you invested in the stock in the first place, then you might be adding to a sunk cost.
What all of these scenarios have in common is lack of external perspective. Emotions, the desire to get even, etc., get in the way of making an objective judgement.
In a multitude of counselors, there is wisdom. Seek advice from someone you trust if you think you’re getting that sinking feeling.