Costly Signaling

Costly signaling is the act of doing something that purposely hampers or hurts you just to show that you can take it. For example, a consultant sacrificing clients they don’t really like, despite losing cash, or someone quitting a job they don’t like, just because they have so many other options.

Underlying Psychology/Biases

Costly signaling works as a kind of opposite of neediness. Instead of showing that you really need something, you’re showing that you don’t need it, to such an extent that you can actually discard it yourself.


  • Sacrifice
    • Sacrificing clients or opportunities that you don’t need, even if it hurts you financially;
    • “This job is not a perfect fit, so I’m not going to move forward with applying”;
    • “This client was not a fit, so I fired them”;
  • Challenging
    • Challenging a possible client or prospect is a great example (it’s also adverse transparency);
    • You are risking irritating the person or even losing them because you don’t care, you just say the truth;
    • “To be honest, I think you’re doing things the wrong way, and I think the facts prove it”;
  • Adverse Transparency
    • Adverse transparency itself communicates abundance;
    • When people care too much about what others think, they are needy. When someone has true abundance, they don’t care;
    • The most famous and successful people are the first to admit what’s wrong with them and the reasons not to hire them. Because they know that who is a fit is a fit anyway;



  • Peacocks
    • An evolutionary example. While other animals survive due to camouflage and being subtle, the peacock survives despite gathering massive attention with its colors;
    • In terms of reproduction, that is why it’s attractive. It’s almost daring predators to attack it, because it can take it;
  • Big purchases
    • Rich people that buy yachts or supercars end up having a lot more costs than pleasure. They do it just to show they can;
  • Quitting and leaving
    • Employees that quit a job that’s not a fit do it just because they can. They have options. Even if losing this position in specific hurts you;
  • Radical transparency
    • Some cultures such as Bridgewater’s promote radical transparency. Saying things to the person’s face regardless of status or position. It’s adverse transparency on steroids;
    • This communicates abundance. You have so many options and abundance you don’t care what the person thinks when you just say the truth;


  • Renown vs. cost
    • When more expensive things are higher quality and cheaper ones are worse, it’s easy to make a decision;
    • But there are cases where the low-quality thing is actually better;
    • People that want to show reputation or exhibit costly signaling will choose, on purpose, the thing that has the highest reputation/renown, even when it’s worse;
    • (E.g., executives trying to take out someone for lunch in a famous restaurant just to show they can do it… even if the famous restaurant is bad);

Commercial/Known Uses

Key Takeaways

  • Costly signaling in specific works by you actively hurting yourself just to show that you can, because you have so many options that you don’t care;