I’ve been thinking about irrational investment influence a lot lately (a term I just made up – one not nearly as catchy as funge). Here’s how I define irrational investment influence.
Irrational investment influence (n.) – when a buyer feels pressure to extract maximum value out of a purchase they have already paid for. Often stress inducing pressure.
If you think about it, this happens often, but what really kicked off this line of thought was Stefan Krasowski’s (Rapid Travel Chai) comment on my probably badly named but I’m not going to change it now post “Dos and Don’ts on your first day at Walt Disney World“.
He wrote, “As a non-parent who occasionally visits Disney I often wonder how many visits are set up for what parents want their kids to want rather than what the kids want. The huge mental and financial investment parents make on such trips creates tremendous pressure. It seems that most kids would be happier just to play in a hotel pool most of the vacation.”
This is so true! When you’ve made such a big commitment, you put yourself and your kids through stressful situations to make it “pay off”. Since you have assigned your experience a certain amount of worth, monetarily and mentally, you can feel pressure to make it “worth it.” To me, this is irrational investment influence.
There’s also another side to irrational investment influence. When you’ve paid a lot of money for something, you can also be biased into rating your experience higher than you thought! Look no further than my post yesterday about why staying at a Disney resort is worth it. It’s a perfectly valid question to ask whether I think it’s worth it because I paid more for it. Psychology is a funny thing.
Anyway, here are some examples that I thought of where irrational investment influence can play a big role and my thoughts on the best way to combat it.
Example 1: Disney World
Look, everyone knows I love Disney World. I’ve probably lost readers because I won’t shut up about it. But Disney World definitely requires a great deal of commitment. Forget the cost (which remember can be very tough to travel hack) – if you don’t invest a lot of time in planning your Disney vacation you might just end up waiting three hours to see Anna and Elsa and do little else (true story, not mine).
So parents (or even adults) have put in a lot of time to planning the “perfect trip” and feel the pressure to make it come off perfectly. That can cause a lot of stress, especially when you find out your four year old suddenly fears almost every single ride! (True story, mine). You’ve spent a bunch of money to go to Disney World and suddenly your kid doesn’t want to do anything. You’ve made the perfect touring plan but it gets blown up when you need to stop to say hi to Pluto on Main Street (don’t do it!). Disney World, like Stefan commented, creates a lot of irrational investment influence.
Since you’ve spent so much you might be tempted to believe your entire trip was magical too. Heck, you get told that every step of the way. So you might have an overinflated sense of how fun your time was there – just because you don’t want to admit to yourself that it wasn’t fun. Beware irrational investment influence!
Example 2: 25 Hyatt stays in 2 months for 2 years Globalist status
People have bent over backwards the last two months (or at least sideways) to rack up 25 stays at Hyatt properties. This gives them Globalist status for two years which should be pretty great!
Now I can’t speak for people who have done this, but I can tell you quite honestly that if I had two years of Globalist status I’d experience irrational investment influence out the wazoo. I’d probably have had to pay $1500 in mattress runs give or take to have made the 25 stays. I would have invested a lot of time, energy, and money in making 25 stays in 59 days (!). Suddenly I’d be feeling pressure to:
- Stay in Hyatts as much as possible the next two years
- Travel more so that I could stay in Hyatts more to make that $1500 I spent “worth it”
- Enjoy those stays because they cost so much dag nabbit!
I know my personality and that’s exactly how I felt. Heck, I felt that way when I “earned” Diamond status by being awake and on Twitter on the right night at the right time. AKA even when Diamond cost me nothing I felt those three things, imagine how I’d feel with time and money invested! So I encourage all you new Globalists out there to avoid irrational investment influence – just have fun with it!
Example 3: Points don’t care how much you paid for them
Here’s a simple reminder (courtesy of Saverocity’s newest blogger indyfinance). Once you’ve earned your points, they don’t care how much you pay for them. Don’t get caught trying so hard to redeem them for maximum value that you don’t redeem them at all. Just redeem them! If you don’t, your cost/benefit ratio is infinity. Personally, I find if I earn at less than a cent per point I can generally redeem liberally without worrying about getting the raw end of the deal. Just my general rule of thumb.
How to combat irrational investment influence
I’m not saying irrational investment influence is bad, by the way. I think of it as a natural psychological phenomenon. But I do think it’s important to be aware of it so you can be rational about the value you are getting.
1. Remember your investment is a sunk cost
For me, I first try to remind myself that any investment I have made is a sunk cost. Sunk cost basically means – you’re not getting that money (probably) or time (definitely) back and whatever you do from this point on will not change that. Practically it means you just have to enjoy yourself! We can’t ride Seven Dwarves Mine Train because you’re scared even though you’re tall enough and I have a FastPass for it and I really want to go? OK let’s just go enjoy this Dole Whip together and appreciate the quality time we get to spend together! (Is what I should have said.) Worrying about how much something cost or how much time I spent on it will just detract from the experience. I have a post planned for Disney World with a child who isn’t into the rides – there’s tons of stuff to do.
Update 2: Wikipedia is fun!
2. Try to remain objective about your experience
Secondly, I try to constantly remind myself to be objective. Like, OK, I love eating chicken fingers on this cruise every single night after dinner (I’ll let you decide whether that’s a true story or not). But if I’m being honest the chicken fingers are just OK. That doesn’t take away from the value of the trip at all since I’m enjoying the heck out of eating them! Or hey, I won’t be surprised if Hyatt still applies its benefits a bit unevenly. That’s fine, too! I don’t need to irrationally pretend otherwise.
At least for me, I find that when I’m not being objective I end up feeling the most disappointed. I keep telling myself how much fun I’m having until I can’t lie to myself anymore.
3. Remember your travel priorities
Finally, I remind myself about my personal travel priorities. I love getting a great deal, Disney World, suite upgrades, and first class flights. But I love my family more. Was I disappointed I didn’t get ride 7DMT on my last trip? Of course, but M and I had so many other great experiences together and that’s what matters in the end. And hey, maybe she’ll still ride it with me one day.
I travel hack so that our family can have fun breaking out of our everyday routines. We get to experience new places and environments for less money. So however much a given trip costs, low or high, I need to remind myself that the goal is spending time together as a family on the road. Sometimes I succeed in this reminder, sometimes I fail, but I always find that the more I ignore my irrational investment influence, the more I enjoy the trip.
My guess is everyone has similar experiences though they may have better ways of coping. It’s the classic “I bought my kid this toy and all they want to do is play with teh box” thing. I gave examples that especially play on my tendencies – Disney and things like status I tend to be more irrational about than other things (like I couldn’t care less about what kind of car the rental agency gives me). What holds the greatest irrational investment influence over you or what did I miss?