Sunk Costs

A sunk cost is something already spent and gone: money, time, effort. The sunk cost fallacy lets it steer the next choice. “We have put so much into this” feels like a reason to continue, but the past spending is gone whichever way you choose.

The useful question looks forward: from here, what will continuing cost and bring, compared with stopping or switching? Sometimes the answer is to continue. The test is that your reason is about what lies ahead, not about the wish to avoid wasting what lies behind.

The feeling is human and worth respecting; wanting to honor effort is not foolish. Give it a place, perhaps as a lesson for next time, and still let the decision rest on what happens next.

The half-built deck

Amit has spent three months and a large sum building a backyard deck. Halfway through, he learns the ground is unstable and the deck will need costly repairs within two years. He keeps building, saying he cannot stop after spending so much.

His friend asks what he would do if someone handed him the half-finished deck today. He would not finish it. The money already spent is gone either way. The real choice is what to do from here, and the question reopens the decision.

Try this today Next time you think “I’ve already put so much in,” ask what you would choose if you were starting from here.

More on this fallacy: Sunk cost fallacy →