The Sunk Cost Fallacy

It’s irrational to consider a sunk cost in any part of any decision. 

You’ll know a sunk cost is something that you’ve spent or invested, where there is little to no chance of you getting your initial investment back – it’s gone – It’s sunk. This becomes a problem when you’re using a sunk cost to base a future decision on; this is because this results in BAD decision-making.

Imagine this; You’ve just picked up a book and you realise that 97 pages in, you don’t like the book and you feel like putting the book down and starting a new one. The book could be an Amazon top seller or whatever, but you feel like putting it down and just starting a new book. The subsequent thought that goes on in your head is that, “Well, I’ve read 97 pages now; if I put the book down now, those 97 pages will have gone to waste.”

By reading however many pages that are left is no way going to release you from that state of feeling unhappy with the book irrespective of the 97 pages you’ve already read. No one is going to gain or get any additional value from you finishing the book and at the same time you will be wasting your time on something you’re not enjoying.

Being sentimental about your resources that you’ve invested will usually lead to further resources being wasted.

We all fall victim to what some call the ‘Sunk Cost Fallacy’, simply based on the fact that, by the time the decision comes to leave or stop something, we’ve invested some kind of resource like money, time, energy etc, which naturally, sometimes, makes the job harder for most people to quit or stop something.

The problem however really lies with not knowing what’s going on during the decision-making process in your head. The ways in which to really understand and get better in understanding what’s going on while your making a decision is to simply do the following:

  1. Simply educate yourself about what a sunk cost is
  2. Be self-aware of your own decision-making process
  3. When in the decision-making process, consciously take a step back and consider your outcome with the knowledge of the sunk cost fallacy
  4. Review your decision and change if necessary

Next time you start that film, where you’ve invested thirty minutes of your time in to, don’t be afraid to just get up and walk away. Spending another hour watching that film will not give you any additional value, so go and do something else you’d maybe enjoy by ignoring the sunk cost of the thirty minutes.

Don’t waste any more resources than necessary.