The Sunk Cost Fallacy; What is it and why does it happen:

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much of our decision making is focused on how and where to invest our time money and effort though we may not realize it our decisions are easily skewed the sunk cost fallacy is one of the more frequent delusions which clouds our judgment sunk costs are outlays of time money or effort that we've already made and because they've already been made we can't get them back they're a thing of the past they're sunk the issue with sunk costs is that we pay too much attention to them we tend to base our current decisions on what we've
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already invested leading us to feel like we have too much invested to quit if you've ever found yourself staying for the entirety of a movie in the theater even though you think it's terrible then you know exactly what we're talking about the sunk cost fallacy is why if we buy a movie ticket for ten dollars many of us feel like we have to stay for the entire movie even if it's absolutely terrible and our mind starts wandering 15 minutes in the ten dollars we spent on that movie is gone the minute we bought the ticket
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whether we stay for the whole movie or leave 15 minutes in we're still out 10 bucks an example that's often used to illustrate the sunk cost fallacy is the Concord supersonic transport project of the French and British governments the two governments wanted to make these really fast supersonic airplanes that could fly across the Atlantic in under four hours but this project was really expensive and in the middle of it they realized that it wasn't going to pay off they weren't going to make much money
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from it but they continued to sink money into the project anyway on the grounds that they had already invested a lot of money the government's paid too much attention to sunk costs when deciding whether or not to continue with the project they were never going to get their initial Investments back so what they should have done is ignore those sunk costs it's worth mentioning that sunk costs don't have to involve money they're just as real with non-monetary things too we can fall into this trap when we continue
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to wear a pair of shoes that make our feet hurt solely because we spent a hundred dollars on them but we also fall into this trap when we stay in a relationship solely because we've already spent three years of our life with that person the sunk cost fallacy seeps into nearly every aspect of our life and because of this it's worth asking the question why does this happen I think there are two main reasons the first is we don't want to appear to be wasteful anytime we stop investing our resources we feel like we're admitting
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that everything we've already invested has been wasted some of us might feel like our job is terrible but we may as well continue with it because we've already put in so much work to quit would make it seem like we've wasted a large portion of our life and we don't like that the second reason is we don't like losses if we've already paid for something we feel like we have to do it even if a better opportunity comes up imagine we bought a ticket to a concert for a hundred dollars then the night before the show a friend calls us and
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offers a free ticket to a Broadway play we can only go to one of them when making the decision on which event to attend I think we'd have a harder time missing the concert we paid a hundred dollars for then we realize even though we might prefer the Broadway play this is because as Richard thaler explains it paying a hundred dollars for a ticket to a concert that you did not attend feels a lot like losing a hundred dollars this idea that we don't like losses along with our desire to not appear as
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wasteful is why we weigh sunk costs so heavily now the message here is not quit everything it's worth sticking some things out the message is ignore sunk costs don't base your decisions off of the time money or effort you've already invested economists and psychologists alike have made this very clear in their research we can't get sunk costs back all we can do is look at the resources we currently have and invest them wisely if we Embrace this idea of sunk costs we should feel better about putting a book
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100 pages in if we're not enjoying it