This is Episode 93 of the After Gambling Podcast. In this episode, we are talking about sunk cost bias and loss aversion.
Hey there, and welcome to the After Gambling Podcast. My name is Jamie. I am now just a non-gambler. Maybe I’ll switch it up; I’ll start using the “non-gambler” phrase because that is probably the most accurate for me these days. I just don’t try to gamble on anything. I don’t try to invest in things outside of myself. I do this little podcast to try to help other people who have gotten into problems with gambling or are trying to help others who have run into problems with gambling, or just trying to learn a little bit more about it. I share what I find out, what I learn, what’s on my mind. A lot of the content comes from my day-to-day interactions.
Today is a perfect example of that, and it provides a perfect segue. We’re going to talk about two topics that I’m not sure if I’ve discussed explicitly on the podcast. I know we’ve talked about the concepts, but we maybe haven’t named them, and we may not have delved into them as deeply as we will in this episode. Those topics are sunk cost bias and loss aversion.
I want to share with you first how this came onto my radar. I really want to give a shout-out to someone, but I have to do it in a special way. There’s someone on Twitter named Joseph—I won’t say his last name because I might mispronounce it. He responded to something I had said on Twitter and shared an article he had written on these two topics: loss aversion and sunk cost bias. It was really well-done. I’d love to share it, but it’s linked on a sports gambling site. So, obviously, I won’t create that link for the show notes. It doesn’t seem appropriate for my audience. However, I wanted to give Joseph credit for bringing this to my attention. It was a great article, and I’ll try to summarize the key points as they relate to us, former gamblers, now non-gamblers, to really learn and grow from it.
First, let’s talk about sunk cost. In the article, Joseph references Daniel Kahneman’s book “Thinking, Fast and Slow,” which I’ve partially read and heard good things about. To explain sunk cost bias, Joseph uses an example from the book about two sports fans attending a sporting event. One fan purchased their ticket a month in advance, while the other received a ticket for free the day of the game. Kahneman’s book poses the question: if a blizzard occurs on the night of the game, which fan is more likely to stay home? Clearly, the person who got the ticket for free might easily decide not to go, whereas the one who paid, especially if they paid a significant amount, would likely brave the snow because of their investment.
This is one of the clearest explanations I’ve come across for the sunk cost fallacy. It’s the idea that we feel we need to continue a certain behavior based on past actions. For many of us, this is relatable to gambling. We think, “If I can just get back to even, I’ll stop.” But a lot of this mindset is due to the sunk cost fallacy. We’re so invested in time and money that we just want to break even.
The second concept is loss aversion. This suggests that losses hurt about twice as much as wins feel good. This resonates with me; wins are fleeting, but losses linger. This often leads us to chase losses, throwing good money after bad.
When I view gambling through these lenses, it makes so much more sense. On one hand, I felt out of control, but looking back, I realize I was making choices. I was taking on riskier bets, knowing the odds were against me. Much of this behavior was driven by loss aversion. I just wanted to get back to even.
The more I study these concepts, the more they seem to define my gambling habits. While some believe gambling addiction is a disease beyond our control, these theories suggest we do have some control, even if it feels otherwise.
Using these concepts can help us evaluate various aspects of our lives. They can aid us in making better decisions, recognizing when we’re acting out of fear of loss, or being influenced by past investments. By naming and understanding these concepts, we can better spot when they might be influencing our decisions.
To wrap up, I encourage everyone to explore these ideas further. Read Kahneman’s book or search for videos and articles on these topics. Understanding them might help you make better choices in the future.
Remember, I am not a doctor or therapist. I’m just Jamie, a guy with a gambling problem. Use this podcast for informational purposes and seek professional help. The music for the show is “Something Elated” by Broke For Free, licensed under the Creative Commons license.
That’s all, and I look forward to seeing you in the next episode.