Jeremiah Rogers

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Living Without Sunk Costs

Shanghai, China.

“I have looked in the mirror every morning and asked myself: ‘If today were the last day of my life, would I want to do what I am about to do today?’ And whenever the answer has been “No” for too many days in a row, I know I need to change something.” ― Steve Jobs

This great quote is from right after Steve Jobs was diagnosed with cancer during the 2005 Stanford Commencement Address. I interpret it as encouragement to live your life in a way that ignores past experiences and always looks to the future.

In economic terms past choices are called “sunk costs”: money and time already spent that can’t be recovered. Economics says that if you’re unhappy with a decision you made in the past you should cut your losses and run.

If you bought a book that you don’t want to read, the best course of action is not to read the book. Reading the book won’t get your money back. It will just cause you excess misery on top of the lost money. Like most people my natural inclination is to run with the sunk cost. If I paid for a book I should read it, right? Of course not. I should do something I’ll enjoy.

I think that ignoring sunk costs is one of the best ways to be happy. I always try to make careful decisions with the future in mind, but when I fail I reverse those decisions as soon as possible. Investing more time and money into past mistakes causes misery that isn’t needed.

In practical terms:

  1. I regularly look at my things and ask “Would I buy this today for what it’s worth right now?” If I wouldn’t buy it today then I sell it or give it away.
  2. I try to tell people why I’m angry or apologize as soon as I can. Life is too short to feel angry or guilty.
  3. If I spent a lot of money on something that I don’t want to use, maybe a plane ticket, I think “Would I travel to this city today for free?” If I wouldn’t go for free then it’s not worth going just because I already spent money.

As a full time traveler with almost no posessions I get to live an extreme version of this life. It’s not quite like living every day as my last: it’s more like living each day as my first.

I’d encourage you to ask yourself: “If today were my first day, what would I do?”, “If my apartment were empty, which of these things would I buy right now?” and maybe “Knowing what I know, would I apply for the job that I’m in today?”

The answers will probably be painful to find out, but cleaning up those mistakes instead of living with them might help make you happier.