The “Sunk Cost Fallacy” is a term used in economics and psychology to describe a specific kind of flawed decision-making. It’s the scenario when we continue a behaviour or endeavour as a result of previously invested resources, be it time, money, or effort, despite the clear evidence of the endeavour not being beneficial.
We’ve all found ourselves saying, “I can’t stop now, otherwise what I’ve invested will be wasted.” This line of thinking is actually a cognitive bias that keeps us stuck in unfavourable situations, even when it would be better to just cut our losses and move on.
Why it Happens
The Sunk Cost Fallacy stems from our inherent fear of waste. Nobody likes to lose resources they’ve invested. It’s part of our nature to want to make the most out of what we’ve invested in, and to extract value wherever we can. The problem is, this often leads us to irrational decisions. We’ll stick with a failing project, a bad relationship, or a boring book simply because we’ve already invested in it.
Steps to Move Forward
Breaking free from the Sunk Cost Fallacy isn’t always easy, but here are a few steps you can take:
- Recognise the Fallacy: Awareness is the first step. Learn to recognise when you’re falling into the Sunk Cost Fallacy trap.
- Reevaluate Objectively: Try to objectively assess your situation. Are you still gaining anything from your investment? Is there a better alternative?
- Focus on the Future: Don’t dwell on what you’ve already invested. Instead, look forward and think about what you stand to gain or lose in the future.
- Seek Advice: Sometimes, you’re too emotionally involved in a situation to see it clearly. Seek advice from trusted friends, family, or advisors.
- Practice Letting Go: Letting go is a skill that gets easier with practice. Start small. The more you do it, the better you’ll get at it.
Reflective Thoughts
- Can you recall an instance where you’ve fallen victim to the Sunk Cost Fallacy? What were the consequences?
- How might recognising this fallacy influence your decision-making moving forward?
- Think of a current situation where you may be sticking to a path simply because of the resources already invested. How can the steps outlined above help you reassess?
Breaking My Addictions Summary
Breaking free from the Sunk Cost Fallacy requires understanding this cognitive bias, recognising when you’re in its grip, and practicing the skill of letting go. It’s about focusing on the future and making decisions based on what will bring the most value moving forward, not what you’ve invested in the past. Today, practice spotting instances of this fallacy in your life. Start small – discard that half-read book you’re not enjoying or change plans instead of sticking with an unsatisfactory course of action just because it was already planned. Over time, you’ll strengthen your ability to make better decisions, regardless of past costs.
