Like a camera flash in a dark room, I awoke in an instant one summer morning in the mid 1990’s to the bustling sounds of an anxious family hurriedly packing their things into a rented Chevrolet conversion van. Though too young at the time to offer any real assistance, I knew the best place for me was out of the way. I took the time to get dressed and ready, all the while being rushed by my older family members so as to make sure we kept pace with the pre-selected timetable. We were headed from the south suburbs of Chicago to the tourist haven known as Pigeon Forge, an oasis of civilization right on the edge of the Great Smoky Mountains National Park.
When the suitcases were arranged in the trunk, we piled into the van and I strategically placed myself in the third row, allowing some space between me and my two siblings. I imagine what followed next was a valuable lesson for my parents on what road trips are like with 3 small children. A lesson that I’m sure they took to heart, seeing as this was the first and only road trip that lasted more than a couple hours. They had done everything right. The van we rented had a TV in the center, we had movies prepared to keep us entertained, we had books, gameboys, and everything else a 90’s kid could possibly want to keep them occupied. None of that mattered, though. After an hour or so, the kids got restless. What followed was what any parent could expect from three bored children. We started with the bickering, followed by the fighting, followed by the threats from up front that our trip would be canceled and we would have to return home. We still had to stop every 2 hours for a bathroom break, we still had to stop once for a snack break, and even then we stopped one last time at a Pizza Hut less than an hour from our destination, because the only thing more annoying than 3 bored children, is three bored hungry children.
When we entered the Pizza Hut, we found ourselves facing another hurdle: a full restaurant and the prospect of waiting for a table. Looking back my parents were pretty good sports about the whole ordeal. They had every right to drop us off on the side of the road with a sign that said “Free to a good home.” They stayed relatively calm and level headed throughout the whole process. Without missing a beat, my dad pulled out his wallet and entertained us by donating some money to the arcade machines. Just as we were sitting, he pulled out this bright yellow duck from the claw machine and proudly presented it to my older brother. Things were definitely starting to look up.
Though not as common now, one of my favorite things about going to Pizza Hut growing up was their buffet. Instead of making one choice as to what you wanted to eat, you were given the opportunity to enjoy whatever your heart desired, and however much of it you desired. I stormed the buffet, plate in hand, and grabbed as much as I could fit on that circular plastic surface. Excitement mounted as I saw the server place a glass of cold Sprite at the table during my walk back. I took my position at the table and dove into the feast before me. It is amazing how much you can accomplish when you don’t take the time to breathe. The whole process from start to finish was over in minutes. I realized soon after that I had taken more pizza than my little stomach could fit, and my frenzy came to a screeching halt. Noticing this, my father turns to me and tries to coax me into finishing what I had set before me. It was at this moment that he said the age old line we have all heard at least once. He put his hand on my back and insisted “You have to get your money’s worth!”
To me the logic seemed flawless and I kept that mindset for many years. It seemed to me that if you pay a flat rate for a product, that the per unit cost goes down based upon how much you consume. It took many years as well as a course in introductory economics to prove to me that this was not the case.
When you pay a flat rate for a product that gives you license to enjoy as much or as little as possible, most does not always mean best. Staying at a concert you don’t want to be at until the end, eating mediocre food at a buffet until you are in pain, or drinking beer at an open bar until you get sick are all good examples of this. Once you pay the price of admission, that money is gone forever and no amount of consumption will get it back. A better method than this would be to assess your level of satisfaction at different stages and get the maximum amount of enjoyment out of it while avoiding all of those negative effects. If you paid full price for a ticket to a concert where the only band you wanted to see was the opening act, it makes sense to leave after their performance and spend the remaining time doing something more enjoyable. Why sit through an unpleasant experience? Is it so you can justify the expense in your head?
In economics this is referred to as a sunk cost. Once you have paid the price you can never get it back. Whether it be a poor investment that you stop pumping money into, an employee you hired who isn’t getting the job done, or any other scenario where progressing any further is a lost cause, sometimes the best course of action is to stop the presses, take any losses, and move on to the next one.
This method of thinking seems counter-intuitive at first. Afterall, why wouldn’t we want to get the most from our money? The answer is, we do want to get the most for our money. The most for our money is right before the moment where we cease getting enjoyment out of the product or service we paid for. Instead of going back for that extra slice of pizza at the buffet, or staying for the final act at a music festival you are tired of being at, having the presence of mind and the self awareness to step away before the experience becomes unpleasant is the only way to truly get your money’s worth.