Editor’s Note: This is a guest post by Louis Chew of Constant Renewal.
Not long ago, I tried clearing some of my possessions. It didn’t go well.
As I went through some old books and notes from school, I wondered to myself if I’d ever use them again. Deep down, I knew there was no chance I’d ever read the same books I enjoyed as a teenager. Still, I kept them. I reasoned with myself that maybe someday someone I knew would need them.
It’s safe to assume that it’s extremely unlikely that someday will ever arrive. The truth is I don’t need those books anymore. Neither did I want them anymore. Yet, I still couldn’t get rid of them. It just feels right to keep those items in my life.
I’m probably not alone in this. This thought process is something that most of us go through whenever it comes to our possessions. Some call it sentimental value. But the better answer is probably found in economics and psychology.
The Endowment Effect
In the 1970’s, psychologist Richard Thaler noticed a weird pattern.
A man who bought a bottle of wine for $5 a few years ago was offered $100 by the wine merchant to buy the bottle back. This was a fair price that the bottle would probably fetch in an auction. But the man declined to sell. When offered a chance to buy a similar bottle from the wine merchant for $100, the man also refused. The man didn’t necessarily appreciate the wine, but he was still unwilling to sell at that price.
This wasn’t an isolated incident; in fact it’s all around us. The Economist recently published an article that surveyed how much people were willing to pay for legroom in an airplane. When told they did not have an automatic right to decline, but would have to negotiate for it, the recliners were only willing to pay $12 on average for this comfort. But when asked how much they would need to be paid to give up their own legroom, they required on average of $39.
The inconsistency is revealing. Psychologists call this the Endowment effect: it’s the tendency for us to overvalue things we own. It explains why we are so unwilling to give something up once we have ownership of it.
At first, the researchers thought that this was a classic case of loss aversion, where we feel the pain of losing something more strongly than the pleasure of gaining something.
That sounds logical, but there’s a more insidious reason. Psychologists have also concluded that this overvaluation may stem from our sense of ownership itself. We value something more simply because it is ours. If we own a car, laptop, or watch of a certain model, we would similarly overvalue that same object owned by someone else because we own one ourselves.
Fighting The Endowment Effect
The Endowment Effect often goes unnoticed by us in most scenarios. What can we do then to counter this phenomenon? Here are three strategies you can apply:
Ask yourself: how much would I pay for this if I didn’t already own it? More often than not, you’ll find that the answer is nothing. If that’s the case, it’s a clear sign you value an item not because of its extrinsic or intrinsic value, but simply because of the endowment effect.
Consider the utility of the item. How much do you really need this item? The 80-20 principle holds true for our possessions as well: 80% of the utility we get comes from 20% of the possessions we own. Is this item adding value or simply creating clutter?
Borrow and don’t own. Luxury brands often offer customers a fitting, trial, or a test of their product. We take advantage of this offer because it’s free. But what we don’t realize is that the endowment effect is already beginning to influence our decisions: we feel like we own that dress or car we’re trying out.
It’s little wonder we walk out of stores with new possessions and less money in the bank more often than we like. If you want to try out a product, borrow it from a friend. This way, the obligation to return the borrowed item will prevent you from holding onto it indefinitely.
The endowment effect takes a larger psychological toll on us than we realize. Every year, we go through the same process of cleaning and figuring out where to store our possessions. Don’t let this happen to you. Take the time to solve this problem once and for all. It’s far better to de-own than declutter.
The cost of ownership is often greater than we think. But that’s not all. The cost and value of things become great only because we own it. And the more we recognize this, the more we’ll feel the liberation of less.
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Louis Chew blogs at Constant Renewal where he inspires others to overcome mental barriers and fears to live their best life.
About Joshua Becker
I have read articles on Josh’s site about car ownership and I do agree with him on that subject. In the UK we have still at present a car leasing scheme for disabled people which part of their allowance goes towards a new vehicle, all maintenance costs are covered by this plus breakdown and insurance . The difference this makes to me mentally is incredible, I don’t own this car and never will , in 3 years I will give back and it will be replaced by another one. I keep this vehicle clean and tidy and fuel it . I said to my wife I wouldn’t want to “own” a car this new as it would be constant worry about the responsibility of it . The mental freedom of not owning is incredibly uplifting and that applies to any product .
My husband is a sucker for the advertised coin collections. Each coin cost us $95 plus shipping. Come with a free case. Not sure how many coins, 50 or so. I feel we won’t get our $$back for them someday. How do you feel about this “stuff”. Drives me crazy. We even have silver bars in our safe paid $1,200.
The price of silver is way up (historically speaking). If you’re hoping to get money from them, now might be the time.
If you cannot store your books in clean dry places, please give them away to someone who can. When we receive old musty books that were stored in a basement, they smell moldy – no one will buy them and they get tossed in the dumpsters instead of being put on thrift shop shelves for resale. Think seriously about storage for your treasures – it is a major problem. Same safeguards for textiles, clothing, curtains, linens, blankets, etc. If they stink, they will be dumped. Most thrift shops do not have laundry facilities and they sell items at very low prices so the cost of cleaning is not something they can afford to do. Even filling up the dumpsters gets to be a major expense.
This makes a lot of sense, I have been struggling and working for several years now to let go of way too many “special” or valuable items. It’s like a war, and each success is like a battle won. I am seeing light at the end of the tunnel, thanks to “uncluttered “ course. Thanks Joshua, staff, and family🥰
I have this exact problem! I feel like I’m growing in strength, but I have finished all the ‘easy’ stuff – so each ‘difficult’ one is certainly a WIN! I do keep on reading about minimalism, so as not to fall back into unconscious and mindless consumerism or my ‘just in case’ mentality of old.
Really helpful article. I would love to try the 30 day challenge but don’t think i could keep up with it, life’s so busy! Instead i just have a little blitz every now and then, no pressure then, just relief ! LOVE the idea of changing my mindset to “de-owning” instead of “decluttering” . The cost of ownership truly is great. And I’ll try to be more assertive with those cheeky freebie trials!!
Maybe also the person does not like where they are. what they are doing etc. In the present. I’m a better writer now than past. but my enthusiasm may have been greater. Those old stories keep me connected to that. Also. research material. haveproblems with that. maybe I’ll use it one day for story. but then I write better in minimal rooms. so. agree with some. I think it’s deeper than the study tho. holding on.
Another way the endowment effect takes shape in our lives is with all the free offers.
Streaming service is free for a month. It’s your responsibility to cancel it.
Companies will send you clothes to try on and send back if you don’t like the way they fit. Hint: you’re less likely to send them back than you think you are; they’ve just created a hoop for you to jump, and you’ve just agreed to take the responsibility for it. You’ll probably keep the clothes/sunglasses/jewellery and overpay for them.
Everything that creates attachment will have an emotional impact on you. The safer step is to work on tools/mechanisms to fight it at the source and keep the stuff out of your life.
Love this – it really makes sense to me! My mum is a classic case! I found The Minimalists’ 30 day Challenge so helpful!
look fashion i love it.
In this otherwise excellent article the author writes, “In the (decade of) 1970’s, psychologist Richard Thaler noticed a weird pattern.”
Using an apostrophe followed by an “s” does not the plural make. In this case it simply creates the possessive of the number 1,970.
This sentence should have been written, “In the 1970s, psychologist Richard Thaler noticed a weird pattern.”
This is an all too common mistake, but a mistake, just the same.
wow
This is a great article. However it seems a lot of Minimalism articles say to Borrow items instead of owning. This means someone else has to buy the item, store it, etc. If you borrow someone’s item, then you should pay something to that person. You also can split the cost of an item to prevent becoming a mooch or one of those never-ending borrowers that everone hates to see coming.
Good point Susan. Perhaps renting may be a better idea. You get the utility of the item for that moment in which you need it but absolve yourself of the cost of ownership.
I finished a book today – “The Tao of Pooh”, by Benjamin Hoff. It seems to parallel this course and is a great short read. Many of the same principles apply to our mind and is much needed in my life!
I finished a book today – “The Tao of Pooh”, by Benjamin Hoff. It seems to parallel this course and is a great short read. Many of the same principles apply to our mind.
I just let go of a lot of items I truly thought I would never let go. It is truly a relief once they have left the property. I sold an entire metal fabrication shop I had held onto with hopes of retiring and using the equipment as a hobby. I also sold 2 jagauars XJS V 12 I restored they where collecting dust taking up space in my garage. Also sold of other items including a custom race car trailer I went into dept to purchase. It was such a relief 2hen all these things left the property seeing one of the jags I sold leaving in an hour WOW never though I would see the day I would be happy to see them leave. My wife is over joyed even my grown up children are relieved. I am amazed at the FREEDOM I have found letting go of things to pursue my true desires. GOD, FAMILY, PEACE, WORK and Relaxing in the mountains at a cabin without worrying about stuff in my garage. Also am able to pursue a hobby of riding 2 Motorcycle Trikes I was able to buy after selling stuff collecting dust and rust in my garage. I have room to park my cars and motorcycles and no worries and a lot less stress. Truly a Blessing learning to let things go and not worry about them.
Good for you, but be careful you do not “undo” your gains in minimalism by trotting right out and replacing the things you just rid yourself of. That’s not minimalism, it’s substitution. My wife is a huge offender in this department. Gets rid of a box of shoes but then orders a few pairs online. No, no, no!!! don’t yield to that temptation!
I like the name “endowment effect” but it almost makes it feel like your stuff is worth even more. An endowment. Ideally, though we will leave our loved ones with an endowment of memories, not an endowment of junk.
I have trouble shedding things that don’t necessarily have a financial value but are old, unique not replaceable.
An example is an old Craftsman push mower. It’s heavyweight steel and durable. I don’t place any financial value on it but don’t want it to become scrap metal. I’d give it to someone if they would take care of it. I have many items like this and the time frame to shift them on craigslist or such.
My grandparents went through the depression and I grew up with the mentality that you don’t get rid of stuff that is usable. I’m buried in stuff that is usable but doesn’t have a lot of $ value.
Use it! Good exercise and they work! :)
An enlightening and insightful article. Much food for thought in this, but hopefully even more, the impetus for letting go of unneeded things. The “costs” of holding on to such things are so much more than financial–they’re primarily mental and cost us–or at least me–my peace (of mind and peace in my home). I have a LONG way to go to regain much of this peace, but articles such as this one help with that (and hopefully, move me to ACTION).
I solved the “sentimental” issue in my life as it relates to stuff/things. I started taking a photo or two of the thing to put in a photo album and started getting rid of the “stuff.” I’m sure before long I will have lots of extra room in my house and looking at the photo brought up the same sentimental feelings.. Regarding books, I’ve kept my school annuals as well as my father’s I inherited a few years ago. I kept them because I actually know many of those signing them. I’ve kept some history books both United States and world. Primarily because they are deleting facts in current history books. The rest of the books I’ve already read went to the used book store. Most of the problem solved.
My hubby has so many books from his university days that he’s sentimental about. Hasn’t touched them in years but he’s not ready to let them go. Luckily we have space to store them but I wish he’d keep about 10 favourites and give the rest away. I can understand wanting to keep something as a symbol from your past, but you don’t need 100 musty old books languishing in the basement.
I enjoy all your articles but particularly this one. I am fighting my family constantly giving myself and my 13 yo their stuff that is “worth some money” I recently got busted by having garage sale. so I nicely said if this stuff is worth so much money you should keep it.
Thank goodness my daughter feels the same way and understands its just stuff and experiences are more important.
I think that one reason we might keep an object is what I would call the “investment effect”: we’ve spent considerable time with it or, in the case of the notes and papers, creating them. I saw this when thinking of replacing my car—we’d been so many places together! It was only when I got one too many repair bills that I could let it go.
Yes, Tracy, this is what psychologists call the “sunk cost” effect. It’s similar, but not exactly on point with loss aversion. Perhaps a way of thinking about these two concepts is that sunk costs are a subset and factor of loss aversion.
Agree! 😳
I think its a catchy phrase for the phenomenon. but I don’t necessarily agree with it particularly regarding the bottle of wine. I help people with things like this all the time. It has been my observation that they don’t get rid of things like the bottle of wine because they can no longer afford to replace it. They may use the bottle of wine if guests come over. But they won’t be replacing it.
The legroom is an interesting example that certainly applies. But when it comes to things in your life that aren’t sentimental ( ie school book, notebooks, things you read as a teenager) the most often deep seated reply is they can’t afford to replace it. but they can afford to store it! And even if the storage over the long run costs more than the object, the individual knows they would never buy it because they ‘couldn’t afford it.’
There s more than one category of ‘stuff’ in your life and therefore more than one reason that you hang on.
Sian, I disagree and agree with your observations. I think that the reason a person hangs onto the notebooks, textbooks, books from their teenage years, etc. is because they ARE sentimental. If they dispose of them, they feel disconnected from their past. I agree, though that they hang onto these items because they can, the space to store them is available. What one needs to understand, is these item keep you grounded in your past, holding you back from truly moving forward. Your past is what brought you to this point, do you really need those items any more? They have served their purpose. Let them go. The test to see if they are truly sentimental is ask yourself the question, would you spend good money to replace those items.
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Exactly right, Jude.
The idea behind the study is not that people should get rid of something because of the cost of storage. It’s the fact that we overvalue something simply because we own it.
If anyone is interested in the study, here’s the link: https://www.princeton.edu/~kahneman/docs/Publications/Anomalies_DK_JLK_RHT_1991.pdf
Excellent post. Thank you for the link.
This is a valuable article and provides some good insights l had never thought of before. However, I also agree with some of Jude’s points. There are many kinds of things/stuff, ergo many reasons we don’t want to get rid of them. Specifically, items inherited that cannot be replaced regardless of how much we are willing to pay because they are no longer made or available in the market place.
Similarly, certain items from our childhood which are of no use and have no particular monetary value, but once again, CANNOT be replaced!
The Endowment Effect: new to me and wow does it ring true. Thx!
Agreed!
good article – it is always good to read specific theory to help explain the different reasons people have so much trouble to release objects in their lives even if they are not actively using them, quite often it is more about their fear of losing something –
not about the actual objects themselves! Thank you for your article.