Party identity and the sunk cost fallacy

By The Standard | Jan. 16, 2022

It is important to take care that your decision is not based on the sunk cost fallacy.

BY ALEX T MAGAISA

This BSR discusses a phenomenon known as the sunk cost fallacy and employs it as a tool to examine how the MDC Alliance might deal with the current question concerning its identity. As we shall see, the sunk cost fallacy is an influential concept in decision-making processes both at an individual and institutional level. Since decisions based on the sunk cost fallacy can prove costly, the most important thing is for decision-makers to take cognizance of it while learning how to avoid it. It is important to take care that your decision is not based on the sunk cost fallacy. Although the concept is applied in the context of political debate, some readers might find more value in it in other areas of their personal, professional, and business lives.

To continue or to return?

The best way to explain the sunk cost fallacy and why it matters is to start with some basic illustrations.

Imagine a group of five people on their way to their local township where authorities are handing out packages of agricultural inputs in preparation for the new farming season. Halfway through their trip, the group meets a colleague who is returning from the township. He informs them that the event has been cancelled. The group must now decide whether to continue or to return home and carry on with their farming activities.

Two members of the group reason that there is no point in continuing with the trip since they have reached a dead end. However, the other three decide to continue. Their reasoning is, “We have already travelled halfway, so we might as well get to the township”. Considering that the purpose for which they set out in the first place no longer exists, the rational choice would be to return home as two of the members do. If that is the case, why then do the other three persist on a pointless journey?

The clue lies in their reasoning that they have already invested time and effort which presumably should not be allowed to go to waste. This reasoning is referred to as the “Sunk Cost Fallacy”. The sunk cost fallacy is when a person makes an irrational decision to persist on a particular path simply because he has already invested in it although there is clear evidence that chances of success no longer exist. One might have invested time, money, or effort. They persist just because of that investment, even though continuing is no longer the best course of action.

The MDC and the sunk cost fallacy

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One view is that the controversies over the brand have made it so toxic that it is time to let it go in favour of a fresh one. A contrary view is that the current name must be maintained because so much has been invested in it over the years and those costs will never be recovered. The fear is that so much will be lost if the name is retired.

The latter line of reasoning is based on the sunk cost fallacy and is fortified by commitment or attachment bias. It is looking at the costs that have been invested. It does not place as much weight on the current and future costs and benefits associated with the brand. Loss aversion is so powerful that the fear of what will be lost is given greater weight than the gain that might be made from any changes, even though the costs of insisting on the old name look increasingly high.

They are high because the issue is more likely to be decided by the courts of law and anyone who has studied the pattern of cases where the MDC Alliance is involved, the risk of getting bad decisions is quite apparent. The MDC has fought for its elected representatives, its headquarters, and its share of funding from the state under the political parties’ financing legislation. It is more than coincidental that it has lost all these cases. It does not require the foresight of a soothsayer to predict that it will suffer a similar fate regarding the party name.

Know your enemy

Sun Tzu says, “to know your enemy, you must become your enemy”. When Douglas Mwonzora wrote that letter to the Zimbabwe Electoral Commission claiming the exclusive title and use of the MDC Alliance, he was merely signalling to the real MDC Alliance and drawing it into a mud fight in an arena in which he is most comfortable. He knows some in the MDC Alliance will be drawn to resist his provocative move, but he also knows that ultimately the matter will be adjudicated in the courts of law and that is a venue where the real MDC Alliance is always playing as the away team. In the end, the real MDC Alliance candidates will be forced to contest as independents, while he uses the MDC Alliance. This is a most uncomfortable position for the real MDC Alliance candidates to be in because they will be contesting without an identity. It is also embarrassing for the organisation, but this is a costly embarrassment that can be avoided.

Some people think the real MDC Alliance will harvest some sympathy if once again it is robbed of its name through a judicial decision. This is too optimistic. The sympathy vote might turn to contempt if the party does not take active measures to protect itself. An organisation that does not take pre-emptive measures against opponents whose actions are predictable might end up being blamed for not protecting itself. People will say, but you knew or ought to have known that this would happen so why did you not do something about it? People were surprised and sympathetic when the regime conspired to rob the MDC Alliance of its MPs, councillors, headquarters, and funding over the last two years. But now, however, the shock factor is gone. Nothing that the regime and its surrogates do surprises them anymore. What they expect, instead, is for the party leadership to take smart measures to counter the offensive.

Balancing costs and benefits

The name has indeed been a distinct symbol of resistance to authoritarian rule over the past two decades. It is instantly recognisable among citizens and foreign observers of Zimbabwean politics as the democratic opposition in Zimbabwe. In business terms, the MDC is a famous trademark. Huge personal and financial investments went into the brand. Politicians and activists have been beaten, jailed, and killed in the name of the MDC. The party has performed better than any other opposition party since independence. Unsurprisingly, there is a huge emotional attachment to the name. This leads to commitment and attachment biases.

But all these are past investments. They reflect sunk costs. They have been spent and they are irrecoverable. Yet they continue to be highly influential in determining the question of whether to persist with the name. As we have observed, a decision to persist with the name only based on past investments is a sunk cost fallacy. However, there is another way to look at it, which is both current and prospective. Such an approach considers the weight of current and future costs and benefits. You ask the question of how the benefits fare compared with the costs. Where the costs outweigh the benefits, the best course of action is abandonment and a new beginning. The fact that there are previous costs that have been incurred should not be the determining factor.

There is no better way to illustrate the costs than the current situation where candidates from the MDC Alliance led by Chamisa and the MDC-T led by Mwonzora are circulating campaign posters as MDC Alliance candidates. Both are saying vote for the MDC Alliance. If the battle for the name is lost, they will have to start again marketing a new name and calling on people not to vote for the MDC Alliance candidate. This is a messy situation. But it serves President Emmerson Mnangagwa well. After all, it works to his advantage to have two MDC Alliance parties fighting it out, thereby cementing the image of the opposition as divided and always fighting. When his peers ask what is going on in his country, he only has to point to the two and say “Look, they are fighting for a name, we don’t even know which one is the MDC Alliance!” A brand that is perennially mired in litigation, political controversy, disputation, and is associated with division and internecine wars eventually morphs into a costly asset. When ordinary people start asking “why bother?” it has ceased to be an asset and has become a liability.

Conclusion

An assessment of current and future costs and benefits associated with the old name is the approach that the MDC Alliance ought to take concerning this issue. It will do well to avoid succumbing to the fallacy of sunk costs in making this important decision because it is irrational. But change is a difficult proposition for any individual or institution. [email protected]