This BSR discusses a phenomenon known as the sunk cost fallacy and employs it as a tool to examine how the MDC Alliance might deal with the current question concerning its identity. As we shall see, the sunk cost fallacy is an influential concept in decision-making processes both at an individual and institutional level. Since decisions based on the sunk cost fallacy can prove costly, the most important thing is for decision-makers to take cognizance of it while learning how to avoid it. It is important to take care that your decision is not based on the sunk cost fallacy. Although the concept is applied in the context of political debate, some readers might find more value in it in other areas of their personal, professional, and business lives.
To continue or to return?
The best way to explain the sunk cost fallacy and why it matters is to start with some basic illustrations.
Imagine a group of five people on their way to their local township where authorities are handing out packages of agricultural inputs in preparation for the new farming season. Halfway through their trip, the group meets a colleague who is returning from the township. He informs them that the event has been cancelled. The group must now decide whether to continue or to return home and carry on with their farming activities.
Two members of the group reason that there is no point in continuing with the trip since they have reached a dead end. However, the other three decide to continue. Their reasoning is, “We have already travelled halfway, so we might as well get to the township”. Considering that the purpose for which they set out in the first place no longer exists, the rational choice would be to return home as two of the members do. If that is the case, why then do the other three persist on a pointless journey?
The clue lies in their reasoning that they have already invested time and effort which presumably should not be allowed to go to waste. This reasoning is referred to as the “Sunk Cost Fallacy”. The sunk cost fallacy is when a person makes an irrational decision to persist on a particular path simply because he has already invested in it although there is clear evidence that chances of success no longer exist. One might have invested time, money, or effort. They persist just because of that investment, even though continuing is no longer the best course of action.
In the example, the reasoning of the three who carry on with the pointless journey is based on the sunk cost fallacy. They carry on simply because they have already spent some time and effort on the journey. For another relatable example, imagine you are watching a film. Halfway through the film, you realize that it’s not to your taste. You have tried but you don’t like it. The rational choice would be to stop watching and find something new. But you might think, “I have already spent an hour watching this film. It’s boring since I have already spent so much time on it, but I might as well finish it.” You end up enduring another hour of self-inflicted torture. You are a victim of the sunk cost fallacy.
These hypothetical scenarios do well to illustrate the sunk cost fallacy, but two more will drive the point home even better. Imagine you have invested some money, time, and effort in the start-up business venture. Some time into the venture, you realize that things are not as you originally imagined and since prospects are bleak, it will definitely cost you more if you continue. But you reason that you might as well carry on because you have already sunk a lot into it.
Finally, imagine you are a farmer, and you can see that the crop is not doing well at all. You must decide whether to abandon it and start afresh or to continue. If you continue just because you have already poured money and effort into the crop and despite the clear evidence of failure, you are succumbing to the sunk cost fallacy.
These are relatable hypothetical examples at the individual level. But the sunk cost fallacy is also applicable at the institutional and governmental levels. A company might start a project that proves to be costly before completion. The best option would be to abandon the project and start afresh. But if the directors insist on continuing with the project just because the company has already invested in it, they are labouring under the weight of the sunk cost fallacy. Likewise, governments fall for the sunk cost fallacy when they launch a program and persist even when the costs outweigh the benefits.
If you are reading this and you work for an organization, company, or the government, you might want to pause and consider instances in which you or your bosses have made decisions based on the sunk cost fallacy. It’s not unusual to hear people say “Takatotanga hazvichagoni kuti timire, let’s just carry on” (We already invested in the project so we can’t just stop, let’s just carry on) even when it is clear that the costs of continuing will exceed the benefits. It’s an irrational decision based on the sunk cost fallacy.
I’m sure by now you can see where this is leading in the context of the controversy over the name of the MDC Alliance. But before we do that, let us examine the reasons why people fall for the sunk cost fallacy.
Why do people fall for the sunk cost fallacy?
The reasons people succumb to the sunk cost fallacy are diverse. A common trigger is a fear of wasting investments combined with false hope of recovery. If you have invested time, effort, or money into a project, you think you are wasting the investment if you abandon it midstream even when that is the best course of action. This is irrational because those past costs will never be recovered anyway, and it is better to focus on current and future costs and benefits. However, you continue because you convince yourself that you might recover. The feja-feja gangs (street betting syndicates) exploit people’s weakness for the sunk cost fallacy. When you are losing and the rational choice is to quit and walk away, you think of the money that you have already lost, and you reckon there is a chance for a big win, and you carry on. In the end, they hoover up every penny that you had, and you are left with nothing.
A related reason is a cognitive bias called “loss aversion” which describes people’s tendency to place a higher value on the pain of losing than the pleasure of winning. Psychologists say we are more hurt by what we lose than we are satisfied by what we gain. They say we are more likely to remember the $100 that we lost than the $100 that we gained. Because of this loss aversion, people are more likely to prioritize losses that they have already incurred than the gains that they would make if they took another path. Therefore, when we make decisions, we are more likely to be influenced by what we lost than by what we might gain. The fear of loss leads an individual or institution to avoid decisions that appear risky even though they might be innovative and more fruitful. This is also because they are more concerned with what they might lose than with what they are likely to gain.
The sunk cost fallacy is fortified by another fallacy called commitment and attachment bias. When we have committed ourselves to a project, especially over a long period, we become emotionally attached to it so much that rational decision-making over it is suspended. Some of us have bags and rooms full of things that we should give away because they no longer serve any practical purpose. But we keep them because we invested in them or because we have an emotional attachment to them resulting from past experiences. If we give them up, we think we are losing a part of us. But we end up with so much clutter, depriving us of space that we could use more productively. As we shall observe in the MDC Alliance debate, emotional attachment bias is an influential factor in the decision-making process.
Another factor that enhances the sunk cost fallacy is the human desire to be correct. People generally like to believe that they are correct. We refuse to believe that we are wrong. Therefore, when we have already made a decision, we do not want anyone or anything suggesting that we made the wrong decision. If we have invested in something, we do not want to believe that we were wrong. We end up insisting on a path, even if it is destructive when the rational thing would be to abandon it and cut our losses. As we observe in the debate over the MDC debate, some people simply do not want to believe that the brand may have become toxified.
The MDC and the sunk cost fallacy
By now you probably have a better appreciation of the sunk cost fallacy and you may have already started to imagine how it might provide a lens through which to examine the dilemma that MDC Alliance leaders and supporters face over the issue of identity. One view is that the controversies over the brand have made it so toxic that it is time to let it go in favour of a fresh one. A contrary view is that the current name must be maintained because so much has been invested in it over the years and those costs will never be recovered. The fear is that so much will be lost if the name is retired.
The latter line of reasoning is based on the sunk cost fallacy and is fortified by commitment or attachment bias. It is looking at the costs that have been invested. It does not place as much weight on the current and future costs and benefits associated with the brand. Loss aversion is so powerful that the fear of what will be lost is given greater weight than the gain that might be made from any changes, even though the costs of insisting on the old name look increasingly high.
They are high because the issue is more likely to be decided by the courts of law and anyone who has studied the pattern of cases where the MDC Alliance is involved, the risk of getting bad decisions is quite apparent. The MDC has fought for its elected representatives, its headquarters, and its share of funding from the state under the political parties’ financing legislation. It is more than coincidental that it has lost all these cases. It does not require the foresight of a soothsayer to predict that it will suffer a similar fate regarding the party name.
Know Your Enemy
Sun Tzu says, “to know your enemy, you must become your enemy”. When Douglas Mwonzora wrote that letter to the Zimbabwe Electoral Commission claiming the exclusive title and use of the MDC Alliance, he was merely signaling to the real MDC Alliance and drawing it into a mud fight in an arena in which he is most comfortable. He knows some in the MDC Alliance will be drawn to resist his provocative move, but he also knows that ultimately the matter will be adjudicated in the courts of law and that is a venue where the real MDC Alliance is always playing as the away team. In the end, the real MDC Alliance candidates will be forced to contest as independents, while he uses the MDC Alliance. This is a most uncomfortable position for the real MDC Alliance candidates to be in because they will be contesting without an identity. It is also embarrassing for the organization, but this is a costly embarrassment that can be avoided.
Some people think the real MDC Alliance will harvest some sympathy if once again it is robbed of its name through a judicial decision. This is too optimistic. The sympathy vote might turn to contempt if the party does not take active measures to protect itself. An organization that does not take pre-emptive measures against opponents whose actions are predictable might end up being blamed for not protecting itself. People will say, but you knew or ought to have known that this would happen so why did you not do something about it? People were surprised and sympathetic when the regime conspired to rob the MDC Alliance of its MPs, councilors, headquarters, and funding over the last two years. But now, however, the shock factor is gone. Nothing that the regime and its surrogates do surprises them anymore. What they expect, instead, is for the party leadership to take smart measures to counter the offensive.
Balancing costs and benefits
The name has indeed been a distinct symbol of resistance to authoritarian rule over the past two decades. It is instantly recognizable among citizens and foreign observers of Zimbabwean politics as the democratic opposition in Zimbabwe. In business terms, the MDC is a famous trademark. Huge personal and financial investments went into the brand. Politicians and activists have been beaten, jailed, and killed in the name of the MDC. The party has performed better than any other opposition party since independence. Unsurprisingly, there is a huge emotional attachment to the name. This leads to commitment and attachment biases.
But all these are past investments. They reflect sunk costs. They have been spent and they are irrecoverable. Yet they continue to be highly influential in determining the question of whether to persist with the name. As we have observed, a decision to persist with the name only based on past investments is a sunk cost fallacy. However, there is another way to look at it, which is both current and prospective. Such an approach considers the weight of current and future costs and benefits. You ask the question of how the benefits fare compared with the costs. Where the costs outweigh the benefits, the best course of action is abandonment and a new beginning. The fact that there are previous costs that have been incurred should not be the determining factor.
There is no better way to illustrate the costs than the current situation where candidates from the MDC Alliance led by Chamisa and the MDC-T led by Mwonzora are circulating campaign posters as MDC Alliance candidates. Both are saying vote for the MDC Alliance. If the battle for the name is lost, they will have to start again marketing a new name and calling on people not to vote for the MDC Alliance candidate. This is a messy situation. But it serves Mnangagwa well. After all, it works to his advantage to have two MDC Alliance parties fighting it out, thereby cementing the image of the opposition as divided and always fighting. When his peers ask what is going on in his country, he only has to point to the two and say “Look, they are fighting for a name, we don’t even know which one is the MDC Alliance!” A brand that is perennially mired in litigation, political controversy, disputation, and is associated with division and internecine wars eventually morphs into a costly asset. When ordinary people start asking “why bother?” it has ceased to be an asset and has become a liability.
An assessment of current and future costs and benefits associated with the old name is the approach that the MDC Alliance ought to take concerning this issue. It will do well to avoid succumbing to the fallacy of sunk costs in making this important decision because it is irrational. But change is a difficult proposition for any individual or institution. As people, we are more partial to what we are already accustomed to, no matter how damaged it has become. It is easier to live with what you know than it is to embrace the new, which is unknown. It requires a huge mental leap to abandon things that we are emotionally attached to and try something different. But to persist with something that is mired in endless legal and political controversies just because of past investments is to fall for the sunk cost fallacy.
This analysis might not help to end the controversy, but perhaps you have learned one concept that might put you in good stead when you are faced with important decisions to make. Sunk cost is tempting, but it is a fallacy that must be avoided.