Overview
The sunk cost fallacy is our tendency to keep investing in something because of what we've already put in, rather than judging it on its future prospects. The time, money, or effort already spent is gone regardless of what you choose next — yet it irrationally pulls us to continue, to 'not waste' it.
The model's discipline is to make decisions based only on future costs and benefits. What's spent is spent; the only question is what the next dollar or hour will earn.
When to use it
Deciding whether to continue something you've already invested in.
How to apply it
Identify the sunk cost
Name what you've already invested and accept it's unrecoverable.
Ignore it in the decision
Set the past investment aside — it's the same whatever you choose.
Judge only future costs and benefits
Ask whether continuing is worthwhile from here, as if starting fresh.
Be willing to stop
If the future doesn't justify it, quitting is the rational move, not the wasteful one.
Common pitfalls
- Framing quitting as 'wasting' what's already spent — it's spent either way.
- Emotional attachment to past effort overriding a clear-eyed look forward.
- Confusing genuine future value with the pull of past investment.
Frequently asked questions
What exactly is a sunk cost?
Any past investment — money, time, effort — that can't be recovered regardless of your future choice. It should be irrelevant to that choice.
How do I beat the fallacy?
Ask whether you'd start the endeavour today, knowing the past spend is gone. Decide only on future costs and benefits.