The Right House in the Wrong Spot

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By J.J. Pinter, Deputy Director

My wife and I recently sold our dream house.  We both loved the house dearly, and it was a great home for our family.  We said that we were never going to move again and that we’d end our lives in that home.

Except, it was in the wrong spot.

Our lives have changed drastically in the last 5 years, with new jobs, more kids, and more involvement in the community.  And, our home was now conveniently located 30 minutes from everything that we did on a constant basis – causing our family to spend many extra hours each week in the car.  In our hearts, my wife and I both knew that we needed to move, but having the uncomfortable discussion about it and deciding to list our house was tremendously difficult.  I suspect that we’re not the only family to have experiences in this vein.

There’s an economic principle at play here called “the sunk cost fallacy”.  A sunk cost is any past cost that has already been paid and cannot be recovered. This money (or time) is now gone, so it shouldn’t figure into the decision making process about whatever problem is trying to be solved.  In actuality, the fact that we have lived in the house for 5 years and had great memories there has no bearing on whether or not it works for us now – but it can be hard to separate the two.

The sunk cost fallacy is a very real thing.  And it affects most people every day.

Here are some examples:

“This movie is terrible, but I’m going to finish watching it, because I’ve invested an hour of my time.”

“I can’t break up with my boyfriend even though I’m unhappy, because we’ve been together such a long time.”

“I can’t possibly go back to school to become a nurse – I’ve been a teacher for 10 years.”

The truth of the matter is that you should end a relationship when you don’t see a future with your partner, becoming a nurse when you are 30 (not 20) still allows a full career, and that it made all the sense in the world for my family to move – but that doesn’t make it easier to make the change.

The common thread for these examples is that the person involved usually knows that their actions don’t make sense, or at least has an inclination that something isn’t right – but they fail to act because the alternative seems too difficult at face value.  Here’s where the fallacy comes in – when you actually look at the alternative objectively, we often find that the obstacles are not nearly as insurmountable as they appear at first glance. Would you rather go through a messy break-up that might take 2 months to recover emotionally from, or be in an unhappy relationship for the rest of your life? Is going back to school for 2 years to learn a new career really harder than working in a job you dislike for the next 40 years? The answer is usually no to these questions, but the sunk cost fallacy keeps people from acting, because they feel invested in what they are currently doing.

As I left a good Fortune 500 job 3-years ago to work for a small non-profit, Team RWB, people constantly ask me about career changes or projects they are pondering with statements like this:

“I really feel like I could use my skillset to help Veterans, but I need to work here 5 more years before we can do it.”

“It’s a life goal to hike the Appalachian Trail with my son, but we can’t afford it.”

“My father was taken by Pancreatic Cancer and I want to get involved in the fight, but if I do it, I want to be able to commit fully, and I don’t have time right now.”

My answer is always the same whenever I am presented with these scenarios: to quote our friends at Nike: “just do it.”  People usually know in their hearts what they really want to do, but the grip of the status quo keeps them from making a change.  The reality of what they want to do is usually very attainable, but the sunk cost fallacy keeps them from stepping into the arena.

Here’s the reality:

A change in housing and a smaller car payment can usually allow for working at a non-profit or start-up.

The Appalachian Trail can be hiked for dollars a day and $100 bucks in second-hand gear.

The average American watches 30 hours of TV a week – there’s plenty of time to volunteer.

So, if you’ve ever said to yourself, “I’d really like to do ______, but I can’t because of _______.

Just do it. 

And if your goal is to help enrich the lives of America’s Veterans – just call us at Team RWB.  We’ll help you get there.