What Is the Endowment Effect?

Greg McKeown says the endowment effect is a brain habit that makes people value things more because they already have them. It covers physical objects and the opportunities in a life. The habit helps until someone overvalues an item that should not stay.

A closet shows how it works. Plenty of people who do not feel incredibly successful still own more clothes than they can use. One woman had hers organized by decade, the 70s and the 80s, and was not using any of the clothes. She just had them. Almost everybody eventually decides to clear a closet, picks an item up to give it away, and then finds it harder to let go than before they picked it up. They think of using it sometime in the future, or remember who gave it to them. Owning a home is generally a good thing because people look after the home better, and nobody in the history of the whole world has washed a rental car.

The same ownership feeling becomes an incredibly real problem when the item is not useful and not valuable. People keep it anyway because they own it or it was endowed to them, and it ought to go.