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.
rachel says
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!!
Gena in general says
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.
Roo Haworth says
I agree about holding on going deeper than the study research has found.
Mickey says
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.
Eliza Hall says
Love this – it really makes sense to me! My mum is a classic case! I found The Minimalists’ 30 day Challenge so helpful!
Kimly says
look fashion i love it.
Bart Smyth says
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.
Judy says
wow
Roo.haworth says
…and it’s one I make a lot! Thanks for pointing this out.
Susan says
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.
Louis Chew says
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.
Kraye says
I “borrow” from my local library. If they don’t have the book that I want, they belong to a large network of libraries and will get it from one of the other libraries. I usually have it in less than a week. They also have an extensive collections of CDs and DVDs to borrow from.
If library doesn’t have it, I can by from EBay if I wish. EBay has second hand. I never buy from Amazon for multiple reasons.
CJ Patton says
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!
Winnie Green says
Love love love this book!!!!!!!
CJ Patton says
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.
John Pote says
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.
Dave says
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!