Your Stuff Isn’t Worth What You Think It Is
Welcome to Part 3 of my series on cognitive bias and how our brains are sneakily undermining our efforts to declutter and organize! For a refresher on the definition of cognitive bias and why I think it’s so important to understand it if you’re having trouble getting organized, check out Part 1.
Today, I’m going to build on the loss aversion bias that we talked about in Part 2. It’s related, but gives you even more nuance on why it’s so hard to get rid of things you don’t really love or need.
I’m speaking, my friends, of the endowment effect.
Simply put, the endowment effect convinces us that things are more valuable just because we own them. A famous experiment done on this effect asked subjects what they would be willing to pay in real dollars for a nondescript coffee mug. Then, they handed different subjects that same coffee mug to hold and asked them how much money would make them willing to sell the mug. It turn out that the mug “owners” valued the mug at twice the price that the “non-owners” did!
You might be able to guess why we evolved to experience the endowment effect. Buying something new costs cash or trade goods, while something you already own is in a sense free, and in a world where most people earned very little extra above subsistence farming and gathering, this kept us solvent. Today, however, cash flow isn’t a problem for most of us in the developed world. We now have the opposite problem: too much stuff that we’re holding onto even though we have a future stream of cash that will allow us to provide for ourselves.
A few years back, I worked with a wonderful couple who were downsizing from their SF condo for a move to an apartment in a senior community. At the very beginning of the process, they stated that they wanted to keep as much as possible, and sell things that had any value.
As I do with many clients, I explained that most items are not worth what we paid for them on the secondary market, but that of course I would do the research for them so they could make their own decisions on whether to sell or donate individual pieces.
As we worked slowly through the home, many different types of items that these clients wanted to sell came up. Each time, I looked them up to get a feel for resale price, and each time it was a fraction of the amount the couple remembered spending on the items. It was truly sobering for all of us.
Fortunately, they had a concrete goal in mind: a move date to a smaller home! So they were able to work through the feelings of loss and devaluation that came up when they realized their stuff wasn’t worth what they thought it was, and make good decisions. They still landed at their senior community with enough items to stuff the apartment to the brim, but it did all fit inside - and that definitely wouldn’t have happened if they hadn’t worked with a professional organizer before moving!
If you think the endowment effect might be holding you back from your organizing goals, what can you do?
Remember that we all share this cognitive bias. Even if we aren’t trying, our brains automatically value the things we already own at a higher price than other people would be willing to pay for them. You’re not crazy for feeling this way!
Ground yourself in reality: find out what your items are really worth so that you’re not making decisions based on bad information. You can do this easily by searching for the specific item on eBay and filtering for items that have already sold. This is the amount of real money that real people have actually paid for this item, which is what it’s worth today.
Ask yourself a key question: am I keeping this thing because I genuinely love and use it, or am I keeping it because I believe it has monetary value? We often confuse those two things! And then, if you’re keeping it because you believe it has value, capture its value by literally turning it into money. Objects generally lose value over time, and there’s no such thing as compound interest on objects. If what you are looking for is an asset you can rely on, sell the item and put the cash into an investment vehicle that will be more reliable and effective over time.
Yes, there are some exceptions to this rule, but believe me when I say that they are few and far between, and when you find them, you need to spend serious time and energy tracking values so that you can sell at the right time. Consider designer handbags: most of them sell for less than the purchase price, except for a very few supply constrained pieces, and prices vary wildly depending on the season and current trends.
What are you holding onto thanks to the endowment effect?
LMW
