Sunk Cost Fallacy, or It’s Okay to Cut your Losses
One of the most interesting terms I’ve learned in adulthood is “sunk cost fallacy.” This is an economic term that describes the mental gymnastics we do when we don’t want to abandon something because of how much we’ve already invested in it. It’s one example of how we don’t always make the most rational choice.
Here are some examples of sunk cost fallacy that you might encounter:
I can’t break up with them, we’ve been together for so long
I’ve already been waiting 30 minutes for the train, it must be coming soon. I’ll keep waiting instead of trying another mode of transit.
I already spent $200 on these concert tickets, I have to go (even though it’s raining and will cost me $50 to get there).
I’ve already spent three years working on this degree, I may as well finish it (even though I’m absolutely miserable).
It’s totally natural to think about how much something has cost so far when deciding whether or not to continue. However, it’s not the most reasonable thing to do. The thing about sunk cost fallacy is that it causes you to look back and focus on what has already happened rather than looking forward to what is the best decision at this moment. This makes the key to getting past this fallacy letting go of the influence of the past, and only looking at what’s before you. The time/money/effort has already been spent, and that’s not a justification for spending more.
Here are some strategies for making a good decision even when you’ve spent so much time/money/effort already.
If you were to start today from the beginning, knowing what you know (or feeling how you feel) would you?
If one of your loved ones was contemplating this course of action, what would you advise them to do?
The bottom line here is that it’s okay to cut your losses, when you realize that something is no longer worth it, or never was.
