Sunk Cost Fallacy

You’ve watched two hours of a terrible movie. Leave now? “But I’ve already invested two hours — might as well see how it ends.” You’ve spent three years on a failing project. Quit? “But we’ve already invested three years — we can’t stop now.” This is the sunk cost fallacy: letting past investments influence future decisions, even though the past can’t be recovered.

Economists call past expenditures “sunk” because they’re gone regardless of what you do next. The rational question is always: given where I am now, what action produces the best future outcome? The past should inform your position but not your direction. Yet we keep investing to justify prior investments.

The mechanism involves several psychological forces. Loss aversion makes abandoning an investment feel like accepting loss. Commitment consistency makes us want our actions to form a coherent narrative. Ego protection makes us reluctant to admit we were wrong. Each force pulls toward continuation regardless of prospects.

The fallacy compounds. Each additional investment becomes another sunk cost pulling toward further investment. Projects become “too big to fail” — which often means “too failed to stop.” The solution was available at every step; the courage to abandon wasn’t.

Escaping sunk costs requires reframing. Don’t ask “how much have I invested?” Ask “if I were starting fresh today, would I begin this project?” If the answer is no, the sunk costs are irrelevant — you’re only continuing because of the past, not the future.

This is emotionally difficult because it requires accepting loss — admitting the prior investment won’t pay off. But the investment is already lost; continuing just adds new losses. The via negativa wisdom: sometimes the best action is stopping, and the biggest obstacle to stopping is everything you’ve already done.