Sunk Cost Fallacy
🇳🇴Sunk cost-effektenDefinition
The sunk cost fallacy is the tendency to continue an endeavor because of past investments of time, money, or effort, even when future costs outweigh expected benefits.
Real-world example
Organizations may continue failing projects because they have already invested heavily. Individuals may stay in unhappy relationships because of time already spent.
Supplementary perspective
The fallacy is closely related to loss aversion and escalation of commitment.
Practical advice
Recognize
- —Ask whether past investments are driving the decision.
Counteract
- —Focus solely on future costs and benefits.
- —Set predefined exit criteria.
Ethical use
- —Normalize stopping failing efforts.
- —Encourage adaptive decision-making.