Wednesday, August 14th, 2019
Do you often find yourself continuing on a path that doesn’t feel right, only because you’ve already invested so much time or money into it? If this sounds familiar, then you’re probably dealing with the negative consequences of the “Sunk Cost Fallacy” mindset.
The Sunk Cost Fallacy describes our tendency to follow through on an endeavor if we have already invested time, effort, or money into it, whether or not the current costs outweigh the benefits.
The Sunk Cost Fallacy means that we are making decisions that are irrational and lead to suboptimal outcomes. We are focused on our past investments instead of our present and future costs and benefits, meaning that we commit ourselves to decisions that are no longer in our best interests.
The Sunk cost effect is still sometimes referred to as the Concorde Fallacy: it refers to the fact that the British and French governments continued to fund the aircraft even after it became apparent there was no longer an economic case for it.
Once you recognize that you won’t succeed, it shouldn’t matter how much time or money you have already put into whatever you are doing. If something has already taken up a lot of your valuable time, it makes no sense to allow them to use up the time you have ahead of you. But if you only think about what you will lose if you move on (instead of the cost of not moving on), you will wind up losing a lot more in the end.
Summing-up: No one is perfect. Human behavior has been hardwired for hundreds of thousands of years. But considering your sunk costs will help you gain critical information for your decision-making process.