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	<title>sunk cost fallacy &#8211; Spencer Greenberg</title>
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	<title>sunk cost fallacy &#8211; Spencer Greenberg</title>
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<site xmlns="com-wordpress:feed-additions:1">23753251</site>	<item>
		<title>What happens when your beliefs can&#8217;t change?</title>
		<link>https://www.spencergreenberg.com/2024/08/what-happens-when-your-beliefs-cant-change/</link>
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		<pubDate>Tue, 13 Aug 2024 14:10:00 +0000</pubDate>
				<category><![CDATA[Essays]]></category>
		<category><![CDATA[anchor beliefs]]></category>
		<category><![CDATA[beliefs]]></category>
		<category><![CDATA[biases]]></category>
		<category><![CDATA[cognitive distortions]]></category>
		<category><![CDATA[criticism]]></category>
		<category><![CDATA[dedication]]></category>
		<category><![CDATA[deluded]]></category>
		<category><![CDATA[delusions]]></category>
		<category><![CDATA[denial]]></category>
		<category><![CDATA[faulty thinking]]></category>
		<category><![CDATA[imposter syndrome]]></category>
		<category><![CDATA[ingroup bias]]></category>
		<category><![CDATA[ingroup loyalty]]></category>
		<category><![CDATA[insight]]></category>
		<category><![CDATA[self-denial]]></category>
		<category><![CDATA[sunk cost fallacy]]></category>
		<category><![CDATA[updating]]></category>
		<guid isPermaLink="false">https://www.spencergreenberg.com/?p=4082</guid>

					<description><![CDATA[This is part 2 in my series about &#8220;anchor beliefs&#8221; &#8211; but you don&#8217;t need to read part 1 in order to understand it. I think that almost everyone has beliefs that are essentially unchangeable. These don&#8217;t feel to us like beliefs but like incontrovertible truths. Counter-evidence can&#8217;t touch them. They are beliefs we can&#8217;t [&#8230;]]]></description>
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<p>This is part 2 in my series about &#8220;anchor beliefs&#8221; &#8211; but you don&#8217;t need <a href="https://www.spencergreenberg.com/2021/11/human-behavior-makes-more-sense-when-you-understand-anchor-beliefs/">to read part 1</a> in order to understand it.</p>



<p>I think that almost everyone has beliefs that are essentially unchangeable. These don&#8217;t feel to us like beliefs but like incontrovertible truths. Counter-evidence can&#8217;t touch them. They are beliefs we can&#8217;t change our mind about. I call these &#8220;Anchor Beliefs.&#8221;</p>



<p>When Anchor Beliefs are false, we distort reality to fit them. So, what distortions do some reasonably common Anchor Beliefs cause?</p>



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<p><strong>Anchor Belief 1: &#8220;I&#8217;m entirely good&#8221; or &#8220;I don&#8217;t do unethical things&#8221;</strong></p>



<p>What happens when someone with these Anchor Beliefs acts highly unethically? Well, since the Anchor Belief can&#8217;t change, that means the action must have been ethically okay to do, or else it was someone else&#8217;s fault or impossible to avoid. Victim blaming, denial, or shirking of responsibility ensues.</p>



<p>&#8220;My whole foundation, life, what I believed in, devotion to the company, was based on believing [Ramesh Balwani] was this person&#8230;He told me he didn&#8217;t know what I was doing in business, that my convictions were wrong&#8230;There was no way I could save our company if he was there…We were trying to do the right thing. We were trying to report results that we believed in and not report results if we thought there was any issue&#8221; -Elizabeth Holmes, who was found guilty on four counts of defrauding the investors in her company, Theranos</p>



<p>&#8220;All I ever wanted was to love women and, in turn, to be loved by them back. Their behavior towards me has only earned my hatred, and rightfully so! I am the true victim in all of this. I am the good guy.&#8221; -Elliot Rodger, in his manifesto about why he planned to commit murder before murdering six people.</p>



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<p><strong>Anchor Belief 2: &#8220;I&#8217;m not good enough&#8221;</strong></p>



<p>What happens when someone with this anchor belief gets a great job, performs really well, or achieves success? Well, it must have been a fluke or mistake; eventually, others will figure it out. Imposter syndrome ensues.</p>



<p>&#8220;No matter what we&#8217;ve done, there comes a point where you think, &#8216;How did I get here? When are they going to discover that I am, in fact, a fraud and take everything away from me?&#8221; &#8211; Tom Hanks, winner of two consecutive Academy Awards for Best Actor</p>



<p>&#8220;I have written 11 books, but each time I think, &#8216;Uh oh, they&#8217;re going to find out now. I&#8217;ve run a game on everybody, and they&#8217;re going to find me out.&#8221; &#8211; Maya Angelou, legendary poet and winner of the Presidential Medal of Freedom.</p>



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<p><strong>Anchor Belief 3: &#8220;This thing I&#8217;ve devoted a great deal of time/energy/identity into works and is good&#8221; [that doesn&#8217;t work or is harmful]</strong></p>



<p>What happens when it&#8217;s criticized? The criticism must be bad faith. Any imperfection in counter-evidence fully invalidates that evidence. Confirmation bias, cherry-picking, and motivated reasoning ensues.</p>



<p>&#8220;Those who have attacked my work on Vitamin C are scoundrels.&#8221; &#8211; Linus Pauling, two-time Nobel prize winner, defending his theory that vitamin C cures cancer and heart disease.</p>



<p>&#8220;We do not find critics of Scientology who do not have criminal pasts…Politician A stands up on his hind legs in a Parliament and brays for a condemnation of Scientology. When we look him over we find crimes &#8211; embezzled funds, moral lapses, a thirst for young boys &#8211; sordid stuff. Wife B howls at her husband for attending a Scientology group. We look her up and find she had a baby he didn&#8217;t know about.&#8221; &#8211; L. Ron Hubbard, founder of Scientology</p>



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<p><strong>Anchor Belief 4: &#8220;My group is good.&#8221;</strong></p>



<p>What happens when their group does something really bad? The victims must be lying or have deserved it. Or acting badly must be justified in this case because it&#8217;s done for some more important greater good. Denial of and justification of immoral actions ensues.</p>



<p>&#8220;When we show a statement by Donald Trump that&#8217;s not truthful, Republicans will say it&#8217;s okay if it&#8217;s not true because it sends the right message, whereas Democrats will say that a statement needs to be factual&#8230;With a statement from Joe Biden, Democrats will say it&#8217;s okay if it&#8217;s not based on evidence, that it supports a generally true message, while Republicans will then have a higher bar and say every statement needs to be based on facts.&#8221; &#8211; Ethan Poskanzer, based on his studies on moral flexibility</p>



<hr class="wp-block-separator has-alpha-channel-opacity"/>



<p>So, what are the takeaways here? I think that the following three things are important and true:</p>



<p>(1) Almost everyone has at least one Anchor Belief &#8211; a belief that is so sticky that it&#8217;s nearly impossible for it to change in the face of even extremely strong counter-evidence. Some people have more of these, and perhaps a small number of people have none, but I think Anchor beliefs are a near-universal among us humans.</p>



<p>(2) When our Anchor Beliefs are false (or partially false), because the beliefs won&#8217;t change, we distort reality when we get evidence against them in order to keep them intact while also somehow &#8220;making sense&#8221; of that counter-evidence.</p>



<p>(3) By looking at fairly common Anchor Beliefs people have, we can start to understand some recurring distortions in people&#8217;s thinking. Since people&#8217;s Anchor Beliefs are fixed but reality sometimes provides strong counter-evidence against these beliefs, that leads to predictable patterns of distortions that people&#8217;s minds deploy to keep the beliefs intact around those Anchor Beliefs.</p>



<p>In particular, I think that we find:</p>



<p>• Anchor Beliefs related to being good may lead to victim blaming and denial of responsibility.</p>



<p>• Anchor Beliefs about not being good enough may lead to imposter syndrome.</p>



<p>• Anchor Beliefs about something we&#8217;ve invested a lot of time/energy/identity into working on and being good may lead to confirmation bias, cherry-picking, and motivated reasoning.</p>



<p>• Anchor Beliefs about our group being good may lead us to deny or justify immoral actions by our group.</p>



<p>There are no strong studies that I&#8217;m aware of that identify or map out anchor beliefs and their frequency in the population &#8211; I believe the points above are true based on my experiences and observations.</p>



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<p><em>This piece was first written on August 13, 2024, and first appeared on my website on September 2, 2024.</em></p>
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		<title>Twelve Recursive Explanations</title>
		<link>https://www.spencergreenberg.com/2021/03/twelve-recursive-explanations/</link>
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		<pubDate>Sun, 21 Mar 2021 17:37:00 +0000</pubDate>
				<category><![CDATA[Essays]]></category>
		<category><![CDATA[anthropics]]></category>
		<category><![CDATA[Baader-Meinhof effect]]></category>
		<category><![CDATA[common knowledge]]></category>
		<category><![CDATA[explore-exploit tradeoff]]></category>
		<category><![CDATA[inferential distance]]></category>
		<category><![CDATA[lists of explanations]]></category>
		<category><![CDATA[meta]]></category>
		<category><![CDATA[opportunity costs]]></category>
		<category><![CDATA[Overton Window]]></category>
		<category><![CDATA[Pareto Optimality]]></category>
		<category><![CDATA[rationality]]></category>
		<category><![CDATA[recursion]]></category>
		<category><![CDATA[satire]]></category>
		<category><![CDATA[Schelling points]]></category>
		<category><![CDATA[Sturgeon&#039;s Law]]></category>
		<category><![CDATA[sunk cost fallacy]]></category>
		<guid isPermaLink="false">https://www.spencergreenberg.com/?p=2684</guid>

					<description><![CDATA[If the Overton Window were not inside of itself, you&#8217;d think I was crazy for writing this. Is it just me, or has the Baader-Meinhof effect been popping up all over the place ever since I learned about it? It&#8217;s hard to justify learning about opportunity costs when there are so many other things you [&#8230;]]]></description>
										<content:encoded><![CDATA[
<ol class="wp-block-list"><li>If the Overton Window were not inside of itself, you&#8217;d think I was crazy for writing this.</li><li>Is it just me, or has the Baader-Meinhof effect been popping up all over the place ever since I learned about it?</li><li>It&#8217;s hard to justify learning about opportunity costs when there are so many other things you could be doing with that time.</li><li>I don&#8217;t think the idea of being Pareto Optimal has made anyone better off without making at least one person worse off.</li><li>What can we infer from the fact that we find ourselves living in a world where we&#8217;ve invented the idea of &#8220;Anthropics&#8221;?</li><li>Everyone knows that everyone knows that everyone knows that everyone knows (and so on) what common knowledge is.</li><li>Ninety percent of explanations of Sturgeon&#8217;s Law are crap.</li><li>I would teach you about Inferential Distance, but it would take too long to explain it to you.</li><li>Let&#8217;s meet at the place where you think that I think that you think that I think that you think is a good place to discuss Schelling Points.</li><li>If you think this sentence is meta, you&#8217;re mistaken; it is one level higher than that.</li><li>You should use some of your time learning about new ideas, like the explore-exploit tradeoff, and the rest of your time applying ideas you already know well.</li><li>I wasn&#8217;t going to include this explanation of the sunk cost fallacy because it&#8217;s obviously bad, but at this point, I&#8217;ve already invested time into it.</li></ol>



<hr class="wp-block-separator"/>



<p>If you liked this piece, you may also like <a href="https://www.spencergreenberg.com/2020/07/50-laws-of-everything/">50 “Laws” of Everything</a>.</p>



<hr class="wp-block-separator"/>



<p><em>This piece was first written on March 21, 2021, and first appeared on this site on March 18, 2022.</em></p>
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		<title>How resetting your psychological baseline can make your life better</title>
		<link>https://www.spencergreenberg.com/2020/10/how-resetting-your-psychological-baseline-can-make-your-life-better/</link>
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		<dc:creator><![CDATA[admin]]></dc:creator>
		<pubDate>Wed, 07 Oct 2020 00:45:00 +0000</pubDate>
				<category><![CDATA[Essays]]></category>
		<category><![CDATA[acceptance]]></category>
		<category><![CDATA[appreciation]]></category>
		<category><![CDATA[baseline]]></category>
		<category><![CDATA[decision-making]]></category>
		<category><![CDATA[fulfilment]]></category>
		<category><![CDATA[gambling]]></category>
		<category><![CDATA[gratitude]]></category>
		<category><![CDATA[greed]]></category>
		<category><![CDATA[happiness]]></category>
		<category><![CDATA[hedonistic treadmill]]></category>
		<category><![CDATA[prospect theory]]></category>
		<category><![CDATA[sunk cost fallacy]]></category>
		<guid isPermaLink="false">https://www.spencergreenberg.com/?p=3829</guid>

					<description><![CDATA[This is a cross-post from ClearerThinking.org from October 6, 2020. Thanks go to Hunter Muir for editing. The piece was updated on December 14, 2022, and was cross-posted on this website on February 3, 2024. Many of us might be feeling bad about life at the moment. One approach that may improve your mood is shifting your [&#8230;]]]></description>
										<content:encoded><![CDATA[
<p><em>This is a cross-post from </em><a href="https://www.clearerthinking.org/post/resetting-your-psychological-baseline" target="_blank" rel="noreferrer noopener"><em>ClearerThinking.org</em></a><em> from October 6, 2020. Thanks go to Hunter Muir for editing. The piece was updated on December 14, 2022, and was cross-posted on this website on February 3, 2024.</em></p>



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<p>Many of us might be feeling bad about life at the moment. One approach that may improve your mood is shifting your psychological &#8220;baseline&#8221; of what you view as normal to reflect the reality you&#8217;re currently living in. This blog examines how to accept the state of things as they currently are instead of getting stuck wishing the world looked how you want it to be. This valuable technique, which we describe below, can be applied to many different kinds of setbacks and difficult situations you encounter.</p>



<h2 class="wp-block-heading">Understanding your psychological baseline</h2>



<p>How bad we feel depends on our psychological &#8220;baseline&#8221; for what we consider normal. For example, if you view the baseline for your finances as having $5000 in the bank, having $3000 is going to make you feel bad. But if you view your baseline as having $1000, then $3000 is going to make you feel good!</p>



<p>Accepting reality as it actually is (letting go of what we call &#8220;mental rebelling&#8221;) can reset your baseline, which can tremendously improve your outlook in some circumstances. If your baseline reflects the way the world actually&nbsp;<em>is</em>, rather than the way it recently&nbsp;<em>was</em>&nbsp;(before something was lost) or the way you&nbsp;<em>want it to be</em>, reality hurts less. Of course, we can (and should) strive to make reality better than it is. But you can still do this while accepting the facts about the current state of the world. Acceptance doesn&#8217;t stop you from taking valuable actions, but it does make it easier to deal with reality.</p>



<h2 class="wp-block-heading">What does acceptance really mean?</h2>



<p>Acceptance is a mental maneuver that is hard to define (we generally lack the vocabulary in English for these kind of mental actions), but it might involve steps like:&nbsp;</p>



<ul class="wp-block-list">
<li>Noting the facts that actually constitute reality (not how you would&nbsp;<em>like</em>&nbsp;reality to be or what reality&nbsp;<em>recently looked like</em>).&nbsp;</li>



<li>Noting that you CAN handle the fact that the state of the world is what it is (unless you literally can&#8217;t, which is another matter, but that&#8217;s rarely true).&nbsp;</li>



<li>Noting that the state of the world does not mean that everything important is lost; there are likely to still be many things of value that exist.&nbsp;</li>



<li>Avoiding &#8220;mental rebelling.&#8221; Mental rebelling might involve thoughts like: &#8220;This can&#8217;t be happening,&#8221; &#8220;This is awful,&#8221; &#8220;I can&#8217;t take this,&#8221; &#8220;This sucks,&#8221; or &#8220;Why me?&#8221; When you notice this kind of thought, acknowledge it (&#8220;I just had the thought &#8220;this can&#8217;t be happening&#8221;), but don&#8217;t dwell on it. Let it drift out of your mind once you&#8217;ve acknowledged it.&nbsp;</li>



<li>Reflecting on the real state of the world and trying to feel an emotion of &#8220;acceptance&#8221; towards it. Feeling this emotion doesn&#8217;t mean you&nbsp;<em>like</em>&nbsp;the current state of the world, but it might help you accept the facts of reality instead of trying to resist them. You can&nbsp;<em>accept</em>&nbsp;a situation that you really dislike, and sometimes, it is essential to do so. And, of course, even after accepting it, you probably will want to work to make that situation better (acceptance doesn&#8217;t stop you from trying to improve things; it just makes reality easier to handle).&nbsp;</li>



<li>Paying the psychological cost of acknowledging that the reality you want doesn&#8217;t exist NOW (instead of putting off that cost). This means not trying to delay the sense of loss that you will feel; that would not be productive, since this loss has already occurred (the state of the world isn&#8217;t the way you want it to be, and it&#8217;s better to acknowledge that now rather than later). It is tempting to avoid acknowledging this because the loss will hurt, but you actually hurt yourself more by delaying the experience.&nbsp;</li>
</ul>



<h2 class="wp-block-heading">An example of acceptance</h2>



<p>To give another monetary example, suppose $100 accidentally fell out of your wallet while you were walking, and now it is gone. You&#8217;re beating yourself up for having lost it and are continuing to search the streets you walked down for the money even though it&#8217;s become abundantly clear you won&#8217;t find it, and you&#8217;re feeling really bad about it.&nbsp;</p>



<p>Acceptance in this situation might look like:&nbsp;</p>



<ul class="wp-block-list">
<li>Fully acknowledging that the $100 is gone&nbsp;</li>



<li>Noting any negative self-talk (&#8220;I&#8217;m such an idiot&#8221;) but letting those thoughts drift away without getting stuck in them&nbsp;</li>



<li>Experiencing the full psychological loss of the money right NOW (not trying to delay the feeling of loss or deny it)&nbsp;</li>



<li>Acknowledging that you can survive without the $100&nbsp;</li>



<li>Attempting to move your baseline (the state you were in when you had $100) to be one that doesn&#8217;t involve having that $100 (so that not having this money feels normal instead of bad). You want to get yourself to the mental state where suddenly stumbling on the $100 would feel like&nbsp;<em>gaining</em>&nbsp;$100, rather than it feeling like simply restoring you back to the prior baseline!&nbsp;</li>
</ul>



<h2 class="wp-block-heading">&nbsp;Using gratitude to shift your baseline</h2>



<p>Shifting your psychological baseline can also be achieved with gratitude. By reminding yourself that not everyone has the good things you have, that you may never have had what you have now, or that you won&#8217;t have it forever, you can move your baseline below the way you currently perceive it. Then, what&#8217;s real starts to look like a gift rather than something merely neutral. Your food feels like more of a gift if you remember not everyone has enough food to eat. Your loved ones are more precious when you remember that not everyone is around people they love.</p>



<h2 class="wp-block-heading">Faulty baselines can bias your decision-making.</h2>



<p>Our psychological baselines also play an important role in decision-making (<a target="_blank" href="http://en.wikipedia.org/wiki/Prospect_theory" rel="noreferrer noopener">&#8220;Prospect Theory&#8221;</a>&nbsp;is one example of this). If you just made a lot of money at a casino, your mental baseline may not yet have caught up to having that extra money. Hence, you view that money as above and beyond what&#8217;s normal, so you are more willing to gamble it than you would be if you came back to the casino tomorrow (after your baseline has adjusted). A way to reduce this bias is to adjust our baseline to match reality faster (though, in this case, it could have the negative side effect of making you not feel as excited about your winnings).&nbsp;</p>



<p>There is a related bias that can occur in the opposite situation: if you&#8217;ve just lost a lot of money at a casino but not adjusted your baseline to incorporate this new state of affairs, you may take unusually risky gambles to try to win the money back (perhaps in the hopes of not having to incorporate this loss into your view of reality). This is obviously a bad idea in a gambling context, and you&#8217;d be better off adjusting your baseline to match reality instead.&nbsp;</p>



<p>When we fall prey to the&nbsp;<a target="_blank" href="https://programs.clearerthinking.org/sunk_costs.html" rel="noreferrer noopener">&#8220;Sunk Cost Fallacy,&#8221;</a>&nbsp;we&#8217;re also failing to adjust our baselines to reality. This fallacy describes what happens when we continue with a project even when we know the future prospects of the project are bad; we don&#8217;t want to have &#8220;wasted&#8221; (or &#8220;sunk&#8221;) all the effort and resources we&#8217;ve put into it already. But if we accept reality and adjust our baseline to incorporate this loss (which has indeed already occurred), the temptation to engage in the sunk cost fallacy may be reduced (or disappear completely).</p>



<h2 class="wp-block-heading">How can you use this information to become happier?</h2>



<p>If you&#8217;re feeling bad about something, try shifting your baseline to reflect your reality by practicing the different forms of acceptance outlined above, and use gratitude to adjust your baseline BELOW reality (so that the state of the world looks better than you might have otherwise thought).&nbsp;</p>



<p>Consider the state of your psychological baseline when making decisions that will affect your future. Does your baseline reflect the way that reality is in the current moment? Are there any recent changes you might have missed?</p>
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