How to Change Your Own Mind When It’s the Right Thing to Do

The Sunk Cost Fallacy describes our human tendency to continuously invest in a losing account even when better options are available. Put simply, we prefer to stick with our decisions even after we’ve realized that the direction we’re going in is not the best one. This makes it very hard to change your mind even if it’s the right thing to do.

Psychology research has shown consistent evidence of the Sunk Cost Fallacy. People will continue to hold onto their stocks, real estate, or other investments because they feel committed to them. They made the investment already, so they have to make it work or be faced with the reality that they made a bad decision. The same idea goes for people staying in bad relationships, dead-end jobs, or trying to force their failing business.

The official Psychology term for the Sunk Cost Fallacy is called Commitment BiasIt can lead to some very bad and costly decision making, so let’s try to get a handle on it.

Understanding our commitments

In his book Seeking Wisdom: From Darwin to Munger, author Peter Bevelin describes the effects of our commitment bias:

Once we’ve made a commitment — a promise, a choice, taken a stand, invested time, money or effort — we want to remain consistent. We want to feel that we’ve made the right decision. And the more we have invested in our behaviour the harder it is to change.”

Our brains love consistency. We want to maintain a consistent self-image with consistent decision making and consistent actions. This helps us have a clear, unambiguous definition of who we are, and to maintain a stable understanding of our world. Stability is comfortable.

But this is quite the slippery slope. Holding onto a stock just because you’re committed to making money from it isn’t a rationally good move. What if it never goes up again? It might be better to just sell it and move that money elsewhere. Why stay stuck in the same job waiting for a promotion, when it’s perfectly possible to grab that same promotion by switching employers? Simply put, there may be an objectively better option available by taking action rather than sticking with your first decision.

Commitment bias can even go as far as warping any new information that comes along as being aligned with our decision, for the sole purpose of confirming it. For example, if you’re in a long-term relationship that you’re hoping will work out, you can easily identify all of the great things about your partner and remember all of the good times you’ve had. On the other hand, it will be quite hard for you to recall all of the bad times. You may be able to recall a few bad times, but they will be far less in number than the good and can be easily dismissed as circumstantial or unlucky.

What is happening is that your brain is trying to prove to itself that you have made the right choice. Warren Buffett explains this idea eloquently:

“What the human being is best at doing is interpreting
all new information so that their prior conclusions remain intact.”

Perhaps one of the worst displays of this fallacy was the United States in the Vietnam War. The US was already receiving heavy criticism for its involvement in the war early on but decided to keep going, sending in more and more troops. They had already committed to showing their military strength. If they were to back out now without a “win” then it would mean public humiliation. They would have damaged their self-image of being a strong nation. George Ball wrote in a letter to then-President Lyndon Johnson:

“Once we suffer large casualties, we will have started a well-nigh irreversible process. Our involvement will be so great that we cannot — without national humiliation — stop short of achieving our complete objectives.”

Changing your mind with wisdom

Understanding the Sunk Cost Fallacy was the first step towards learning how to change your mind. What we want to do now is overcome this fallacy and bring rationality back into our decision making. Doing so will help you to develop your skill in deciding when it’s better to change your mind. There are a few ways to do this.

Drop the plan

Sometimes, having no plan is the best strategy because then you won’t be committed to anything. You can change at any moment without feeling that you need to maintain any consistency. Warren Buffett talks about the advantages of having no concrete plan for his investment firm, Berkshire Hathaway:

“We do have a few advantages, perhaps the greatest being that we don’t have a strategic plan. Thus we feel no need to proceed in an ordained direction but can instead simply decide what makes sense for our owners.”

By dropping the plan, Buffett and his team are able to quickly adapt to changes. They don’t care much if they have to change from their initial direction or think about the market differently. They just care about getting the best possible return. This mindset encourages them to always jump on the best opportunities without being stuck in any rigid plan.

Leave your plans a bit flexible and open. You can have a general goal, just like Buffett does with “get the best returns,” but don’t be tied to any kind of step-by-step restrictions. Do what needs to be done to reach the overall goal, even if that means changing course along the way.

Remove the past

Removing past events and commitments from your decision making will encourage you to adjust course when necessary. The famous Historian Thomas Carlyle once said that:

“Our main business is not to see what lies dimly at a distance, but to do what lies clearly at hand. ”

Perhaps the stock you purchased looked great last month, but the latest news shows otherwise. That’s perfectly OK, you can change course and as Carlyle said “do what lies clearly at hand,” make the best decision based on the information that you have right now.

The past is gone and done. One should make their decisions based on the information that is presently available. New information could mean a better option has emerged. Don’t let the past of yesterday influence your decisions of today.

Look at facts only

A great exercise for better decision making is to write down all of the facts only. We define a fact as something that is objectively true and 100% verifiable. For your decision making, you can label the facts as positive or negative to check if the choice will be a good one. This is similar to the pros and cons approach of Benjamin Franklin. Franklin writes:

My way is to divide half a sheet of paper by a line into two columns; writing over the one Pro and over the other Con…When I have thus got them altogether in one view, I endeavor to estimate their respective weights…. I find where the balance lies; and if after a day or two of further consideration, nothing new that is of importance occurs on either side, I come to a determination accordingly.”

The advantage of this method is that it is fully objective. There are no emotions or cognitive biases involved. The decision itself is logical in that the pros and cons are directly weighed and calculated. This decision making technique can be applied at any time, either before you make your initial decision or afterwards to determine if you should change course. Logic and rationality grant you freedom from the influence of the Sunk Cost Fallacy.

Let other people check you

We certainly won’t be able to know everything all of the time; our own perspective is in itself biased. But what we can do is ask other people to help us out, to double-check our decision making. The Italian artist and scientist Leonardo da Vinci says:

“We know well that mistakes are more easily detected in the works of others than in one’s own. When you are painting you should take a flat mirror and often look at your work within it, and it will then be seen in reserve, and will appear to be by the hand of some other master, and you will be better able to judge of its faults than in any other way.”

Other people have a different view of your work. They will be able to see your situation more objectively since they are not tied to the emotional self-image that you are. They aren’t restricted by the same Sunk Cost Fallacy since they’re not as invested in your decision.

So when you have the opportunity, ask people to review your decision. Try to give them the rawest, most uncut view of your situation such that they can look at it objectively. With that second opinion, you’ll more easily be able to spot mistakes and pick the best option available.

In Summary

Changing your mind on a previous decision is often a great thing to do. There could be a better option now due to new information. But we often find it hard to change our minds due to the Sunk Cost Fallacy in Psychology. There are a few ways to overcome it:

  1. Drop the plan — leave your plans a bit flexible and open so you can always adapt to the best strategy
  2. Remove the past — don’t let the past of yesterday influence your decisions of today
  3. Look at facts only — to ensure that your decisions are always rooted in logic and rationality
  4. Let other people check you — a second pair of eyes always helps

Recommended Reading

Seeking Wisdom: From Darwin to Munger by Peter Bevelin

Thinking: Fast and Slow by Daniel Kahneman

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