6 Logical Fallacies That Cost You Money Every Day

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Today, man sits atop the food chain, picking steak from his teeth with toothpicks made out of more steak. But instead of spraying champagne into one another's eyes while chanting "We're #1!" at zoo animals, we've taken up a new pursuit: getting rich.

The good news is that, despite what 50 Cent may tell you, we generally don't die if we lose. The bad news is, evolution hasn't exactly helped us adapt to this new lifestyle, and as a result your brain continually tells you to do some things that will keep you poor forever.

For instance, your brain...

Thinks The Future Is an Urban Legend

6 Logical Fallacies That Cost You Money Every Day

Back when natural selection stopped picking us off for things like "thought that grizzly bear just wanted a hug," the future was far less reliable. Back then, when you had to choose between eating a rat now or holding out for deer a week from now, your brain told you to make with the rat stew. And it was right! Being able to imagine how good a deer would taste in 100 days had no evolutionary advantage, and so we just never got around to being good at it.

6 Logical Fallacies That Cost You Money Every Day

Today, the future is about as predictable as it's ever been. If the government guarantees to pay you $200 when you turn 65, there are laws in place that say they have to do it. But our brains don't know that. So when a guy in a white lab coat walks up and offers to pay us $100 in a year, or $50 right now, our brains still tell us to go for the rat stew.

6 Logical Fallacies That Cost You Money Every Day

This is what's called hyperbolic discounting, a scientific term that means your brain is about as far from rational as it can get before they're legally required to keep you in a zoo enclosure. We're only half kidding. Hyperbolic discounting puts us on the level of pigeons and rats in the realms of fiscal responsibility.

It's not just a lab experiment. There are entire industries that rely on your inability to think rationally about the future. Our whole economic crisis was kicked off by borrowers taking on loans they couldn't afford, after lenders offered them lower payments (or no payments at all) for the first year. Credit card companies still rely on your brain to make purchases now that you won't be able to pay for at the end of the month. Top Gun drill sergeants rely on your ego to write checks that your body can't cash.

6 Logical Fallacies That Cost You Money Every Day

The real pioneers in the art of hyperbolic discounting are the cigarette companies and drug dealers, who do a pretty swift business delivering a momentary and fleeting fix in exchange for a little cash, and the right to bankrupt or murder you at some point down the line. We're pretty sure not even the pigeons would go for that deal.

Believes It Can Use Its Own Stupidity as a Time Machine

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But hey, we're nothing if not resourceful, right? Back when your genetic line was sailing around in the man pouch of a hunter gatherer, you only made it through a long winter by making every last deer testicle count. How can that be a bad thing?

Well, that's left us with a brain that's really worried about making sure we don't waste money we've already spent, or as it's known in the field of economics, "money that's not fucking yours anymore."

6 Logical Fallacies That Cost You Money Every Day

For instance, let's say you're in the market for a replacement computer, and the best thing for what you want is a $500 PC. However, you've always been a Mac user and recently dropped $600 on a wireless Apple keyboard (yeah, you went with the cheap one). Now, even though you like everything better about the Dell (it comes with its own wireless keyboard that wasn't built for someone with tiny, elf-hands), and it's twice as cheap as the nearest Mac equivalent, your brain will tell you not to waste the money you spent on the keyboard.

So, in the name of not letting the keyboard go to waste, you buy the Mac.

6 Logical Fallacies That Cost You Money Every Day

This is what's known as the sunk cost fallacy: a mechanism in your brain that tells you to spend money on something, simply because you've already spent money on it. In the above scenario, if you were a perfectly rational being, you'd realize that the ship has sailed on that $600, and it had every cent of every purchase you've ever made on board. The only thing that should figure into any economic decision is the money and possessions you have in the present tense, and how they can be best used to make your life better in the future.

But thanks to the way your brain is wired, you're likely to go about this exactly backwards: screwing over your future self in order to stay loyal to decisions you made in the past.

Won't Let You Get Rid of Useless Shit

6 Logical Fallacies That Cost You Money Every Day

But wait a second: Why not just buy the Dell, then go on eBay and sell the useless Mac keyboard? Nothing wrong with that in theory, right? Fits perfectly with the "making your current possessions work for you." But something in you resists the idea. As a result, you're about to get screwed again thanks to the disposition effect.

This is the brain mechanism that tells you to wait for a better price on something that, in reality, will never go up in value. Investors suffer from this all the time; when a stock is losing value, instead of selling it and taking what they can get, they hold onto it. It's not optimism that it's going to go up (they'll do it even if all evidence says it won't) but rather being too pissed off at the idea of selling it for less than they paid.

Of course, this means your brain is much more likely to sell off a good investment, like say that comic book some chump is willing to pay $20 for.

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It's the same impulse that makes people hoard useless stuff, unable to grasp the fact that it'll never be useful again. How many of you have cardboard boxes in the garage or basement full of dusty old hard drives and video cards, as if that shit is going to come back in style one day?

Here's another industry profiting off our malfunction: self storage companies. Yep, your brain is apparently perfectly willing to pay $200 a month to store a bunch of useless crap you no longer want or need, instead of just selling it or doing something REALLY tacky, like donating it to charity.

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That can is probably dirty anyway

On a similar note, your brain...

Throws Good Money After Bad

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The competitive instinct is not just a phrase football commentators invented to give words to the tingly feeling they get watching Brett Favre play football. Our brain's natural tendency towards competition is arguably the reason your family survived the hunter gatherer knife fight of 2000 BC.

And as countless uninspired armies and poorly coached teams have demonstrated throughout the years, your ability to compete tends to be directly proportional to your ability to convince yourself that you're doing the right thing. This leaves us with a brain that loves to compete, and is awesome at convincing itself that it's right.

In the financial realms, when these two instincts collide, your brain will play a retarded game of chicken with reality that economists have termed "irrational escalation of commitment".

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This applies to more than finances

As we've already established, when faced with the prospect of a $3,000 repair on your shitty car, or purchasing a slightly less shitty car for $2,500, your brain will tell you to go with the repairs because you "already sunk ten grand into the shit box." (Yes, we just quoted your brain. It talks like a little girl. Deal with it.) But what happens the next time your car needs a repair? Well thanks to something behavioral economists have termed post-purchase rationalization, your brain will have convinced itself that the last decisions was a great idea. And since you've now sunk 13 grand into the shit box, it's going to seem like an even better idea to keep piling up the bad decisions.

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Throw in a little competitive instinct and pride, and it's not hard to see how this can go horribly, horribly wrong. Your brain will keep pushing your head further and further up your ass, piling up bad decisions with the ferocity of a rabid Glenn Beck.

The real world implications are everywhere, and tragic. For instance, it can justify escalation of a war. In 2005 America's President said that we "owed" the 2,000 American soldiers who had died in Iraq to "finish the task that they gave their lives for." Regardless of what your politics were, to a certain part of your brain, that sounds like a logically constructed argument. Why do these men have to die? Because these other men died, of course! And only the deaths of these additional men will cause those first men to come back to life!

After all, what else can we do, cut and run?

Has No Idea What Money's Worth

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It turns out your brain is really, really bad at understanding that a $20 and twenty $1 bills are the same thing. That's why entertainment venues from strip clubs to arcades make you use tiny denominations: they know you'll spend a lot more. This is called the denomination effect, and while it'd be easy to claim that this is because we "lose track" of how much we're spending when we've got a gangster role of Washington's in our fist and some titties in our face, the study that coined the term says differently.

6 Logical Fallacies That Cost You Money Every Day

The scientists conducting it just gave two sets of (presumably confused) people either a $5 bill or five $1 bills and watched as the people with the fives held on to them while the folks with the ones, who had no titties in their face or time to lose track of the money, splurged on Jerky and trail mix.

This leads scientists to the depressing conclusion that your brain basically views the amount of money you make as a number, instead of what that money can actually buy.

This is called the money illusion, because in reality, your money is only as good as what it can buy. If you've got twenty dollars in your wallet, you should be thinking of it in terms of what it can buy you: Four beers, or two movie tickets, or a blowjob from any cast member of "The Facts of Life". But that's a lot of shit to keep track of, so your brain prefers to just stick with the number, and assumes a higher number means more beer and orgasms.

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Which is important, as shown in the official USDA Man Pyramid

Of course that's not always the case. Your boss can give you a two percent raise in a year when inflation is expected to be four percent. But because your brain isn't built for complex concepts, you'll be thanking him as you and your family eat your breakfasts out of a can of Bush's.

Sucks at Figuring the Odds

6 Logical Fallacies That Cost You Money Every Day

In the olden days, your brain wasn't punished for locking in on some detail, and assuming it had some significance that wasn't there. Worst case scenario, you spent a few winters worshiping at the altar of the sun God, and sacrificing the kid who was born funny looking. These days there are people who know that we're all pattern seeking creatures who will look at a man winning money while wearing purple pants and go out and blow all of our money on purple pants.

6 Logical Fallacies That Cost You Money Every Day

As we've mentioned before, your brain sucks, and sucks hard, at probability. But there are all these wonderful ways in which, in the face of odds that makes the rational part think "This isn't such a good idea", the rest of your brain rams the pedal to the medal right into the brick wall of stupid.

There are two that really screw you in regards to that lottery, though: the gambler's fallacy and the focusing effect.

The gambler's fallacy is the belief that short term actions have an effect on long-term odds. You see the roulette ball fall into red three times in a row and you think it's due to fall into black next, or that the color red is somehow on a hot streak. Of course in reality, every time the ball is dropped into the wheel, your chances are exactly 50/50 of each color coming up. You're just looking at a display of total and utter randomness, and seeing a pattern that isn't there.

6 Logical Fallacies That Cost You Money Every Day

The gambler's fallacy is a permutation of the focusing effect, also known as anchoring. Your brain has a tendency to latch onto something and never let it go. It served you well back in the day when you were as likely to see the negative and positive consequences of people's decisions, helping you remember what happened to that farmer who tried to feed his family by burying a bunch of meat in his field.

But in modern times, we're far less likely to see the negative consequences. You hear about some hick winning $300 million and your brain latches onto that, conveniently forgetting that for the one guy who paid a buck and won $300 million, there are 299 million or so losers who might as well have paid a buck to get a swift kick to the shins.

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Screw your rightness about the future, Orwell

There is one piece of good news to report: It turns out that one of the things that the focusing effect is most likely to make us over-value is how happy material wealth will make us (good health and being in love are much more likely to make you live a happy and fulfilled life - it's science).

In other words, maybe it's time we all bought a bottle of champagne, took a trip to the zoo, and told those Tigers who's number one.

6 Logical Fallacies That Cost You Money Every Day

To see how else your brain is screwing with you, check out 5 Ways Your Brain Is Messing With Your Head. But don't worry, because you can turn the tables on it, in 5 Ways To Hack Your Brain Into Awesomeness.

And don't forget to follow us on Facebook and Twitter to get dick jokes sent straight to your news feed.

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