Sunk Cost
When I was in graduate school studying Cognitive Psychology, I learned about an error in the human decision-making process called sunk cost. This refers to resources, whether they are time or money or anything else, that have already been spent. The decisionmaking error is that people tend to take sunk cost into account when making present and future decisions.
The most common example of this occurs in recognizing how we behave when we wait in line. Think about the times you have been in a line for a long time, a line that is not moving, and you have other things to do with your day. If you were to walk up to the line right then and you saw that it was going nowhere, you would decide to come back later when the wait was not so long. However, because you’ve already been waiting for so long, you persist. Notice the problem here. If you were to make the decision in absence of the time already spent, you would walk away. Nevertheless, you stay because of the time invested. You take into account unrecoverable resources, making a decision that is completely flawed.
Another example is commonly seen when analyzing relationships. How many times have you asked people you know why they are still in a bad relationship and the answer is: “Because I already have so much time invested in the relationship”? If they were to rationally view the relationship without consideration for the time already invested, they would leave. Again, this is faulty decision making. The decision should be based on present circumstances and upside going forward. The past investment should not be taken into account. When considering sunk cost, you are not just making a bad decision now; you are also incurring “opportunity cost.” In this case, you’re costing yourself the opportunity to meet the man or woman of your dreams and get into a good relationship.
This applies perfectly to poker. In fact, poker players are some of the worst offenders in the sunk cost department. Each decision in poker should be made based only on the math at the decision-making point. Given the information you have about your opponent’s hand and what you know about your hand, you make an assessment of the probability of your hand winning (the hand odds) and then compare that to the money in the pot and to the amount of money you will have to bet at the decision point (the pot odds). If the pot odds are greater than the hand odds, you play; if not, you fold (unless, of course, you can bluff, but the odds of the success of the bluff get taken into account anyway). The decision at that point comes down to pure math.
But poker players tend not to take math into account. Players — and you know if you are an offender — will make calls that are mathematically poor if they have money already invested in the pot. This happens most often when people make calls that are too loose from the big blind, because they want their blind back. Or they will make bad calls with draws on the turn, because they have already invested money with the draw on the flop. They want to protect their investment.
The problem is that the money you have already put in the pot doesn’t belong to you anymore. The minute that that money leaves your stack and goes into the middle of the table, it belongs to the pot. The decisions you make beyond that should be based on the pot size; and the pot size is relevant because it determines the pot odds you are getting at that time. Where the money came from has no bearing on whether a call is mathematically good or bad. If you feel you have money to protect, you are much more likely to play on in situations that are mathematically disadvantageous.
And just as in the life examples above, there is opportunity cost in poker, too. If you call off a bunch of money in a bad spot because you erroneously take sunk cost into account, you are costing yourself the opportunity to earn on the money you just lost. If you are a player with an advantage, which I assume you are, then every penny you invest in a game has an earning potential.
In poker, you need to invest to make money, and reducing your bankroll by making a bad call to protect money that doesn’t even belong to you anymore — well, that’s just bad decision making all around.
