Sunk cost fallacy
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The desperation to win, the greed for big profit, the hope that something you lost might be recover. These emotions are the major contributor of the sunk cost fallacy.
In this article, I will discuss how can sunk cost fallacy affect our decisions and how emotion plays a big part to it. Base from my experience through gambling and investing. And what I learned to avoid falling into this trap once again.
What does sunk cost fallacy means?
In gambling, it is an act of stubbornness to take a course of action by changing strategy or stop playing because you have lost a lot and think that you can still recover how much you've lost. Chasing the loss, not knowing it will cost you more. (Habol ng habol hangang sa lalong maubusan) 🙈
If you have watched the movie 21, where Ben, the protagonist during the climax of the movie, he lost focus on counting the cards, so his team asked him to stop playing, but he did not stop. Instead he allows himself to be controlled and consumed by his emotions. In the end he lost the 200 grand money that made his teacher angry and left them with vegas. Well I don't want to spoil you of details but it is truly recommended.
In investing, it is when you are heavily invested in a coin or token and have lost a considerable amount of money, yet you still think it will recover, but it is nowhere near there, or there is a little to zero chance that it will happen again.
For example, investing in a token and after a week it booms, but you did not take profit. Or you did, but only a little, hoping that it would bounce back higher. And suddenly it went down, but you still insisted it would go up, so you added more. And then it climbs a little, and bounces down again. And since you're heavily invested in it, you still did not close your position. But the creator does not give a sht about the token anyway.
Sunk cost fallacy can also be applied in a relationship, but it is not my line of expertise. But to give you a little insight, it is when you already feel that you are just holding on because you have been together for years and you think it’s a waste to abandon the relationship. Even though, you think you deserve more, or you’re slowly losing interest in the set up, you still reason out that everything will be back from square one. But in reality, you both don’t know how to get it back to the way it used to be. Allowing both of you to suffer instead of moving forward.
In short, the sunk cost fallacy means losing your logical reasoning and letting your emotions take control over your decision. In the end, you both suffer, you lose more money, time and effort. It is gambling the future's cost or loss and the only way to stop it, is stop.
What I learned and what are the strategies I have discovered in order to not fall into this trap again?
In gambling, I slowly gets the algorithm of the system. You should not play everyday. Because when you do, the system recognize your strategy. Also whenever I play crash, or dice I always hunt for a larger multiplier. Usually, I hunt for 200x when I have already reach a bet of 150 times yet I'm still not getting a positive green. I would stop the game.
Because the system is design like that, it lures you to play more. It makes you greedy. So you shout set your goal straight, are you okay with a little profit? Or a very risky game?
It is important to know when to stop and avoid that sick greed inside you.
In investing, well I can say I've made a lot of wrong decision in my crypto journey. So recognizing them means I learn from it the hard way. I made a list of reminder whenever I open a position.
I always forgot not to get attached to the coin or token. Investing is separate from faith.
A little profit is not a loss it is a profit.
Learn to set stop loss or cut loss.
When there's up, there's down.
Greed will make you poor.
Don't get your hopes up. A missed opportunity is not a loss, it means you need to build one.
In relationship, I don't have any idea so I'm leaving that to the expert.
What do you think? Have you been in any situation where you have been sunk-cost-fallacied? That was a pun!
Anyway thank you for reading!
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I was in that situation - kinda have an issue on letting go some of the tokens especially the new ones that I just entered Defipet tokens. I bought it at a high price now it is way low. It was a lost, and not planning to invest in some tokens for a while.