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.
Ola says
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.
Todd says
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.
Vince says
Use it! Good exercise and they work! :)
Tamara Robinson says
Me too!! I have only been working on decluttering (purging as I’ve called it) for about 2 years so I’m down to the things I can’t just take to the thrift store because I want them to go to someone who will use and enjoy them, not that big dumpster beside the donation area at every thrift store. I have taken things to the thrift store and watched them tossing other’s donations in the trash that I KNOW could have sold because it’s something I would have bought myself when that was all I could afford. I saw them toss a perfectly good football in the dumpster once and wanted to scream at that underpaid fool. Some little boy, who couldn’t just go to Walmart and buy a new one, would have loved to have that football. So I don’t mind at all taking things to the thrift store, but there are some things I just can’t do that with. For example, I have a ton of cassette tapes that really mean a lot to me. I listened to all of them, over and over and over. I don’t need them but none of the thrift stores around me have cassette tapes to buy so I know they will just toss them. This is now one of the next things to work on. I will take pictures and sell them to some cassette collectors. It will make them happy and make me feel better about letting them go! I need that space too. I am soooo enjoying the space I’ve made so far, just slowly picking through each closet. 😁
Dana says
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).
Beverly says
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.
Holly says
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.
Jennifer says
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.
Tracy says
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.
Louis Chew says
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.
Sarah says
Agree! ?
Sian says
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.
Jude says
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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Jeff says
Exactly right, Jude.
Louis Chew says
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
Sandra says
Excellent post. Thank you for the link.
Leslie says
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!
Kevin McGrane Sr. says
The Endowment Effect: new to me and wow does it ring true. Thx!
Judy says
Agreed!
sarah says
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.