Sunk cost
Money and time already spent are gone either way, so they should not decide what you do next.
- money
You're not finishing that course because it's good. You're finishing it because you paid for it.
A sunk cost is money, time or effort you have already spent and cannot get back. The fallacy is letting it push you into spending more. Hal Arkes and Catherine Blumer showed how strongly past spending pulls on our choices; it is sometimes called the Concorde fallacy, after the plane that kept being funded long after it stopped making sense.
This is a way to think, not financial, medical or legal advice.
What it is
The past is already paid for.
- A cost you cannot recover
- Whatever you choose next, that money or time stays spent. So it cannot tell you which choice is better.
- The fallacy
- Continuing something only because you have already put a lot into it.
When to reach for it
Whenever you hear yourself say 'but I already...'
- Paid memberships and courses
- A gym, an online course, a coaching class you stopped going to.
- Long projects
- A side business, a degree, a renovation that keeps growing.
- Relationships and jobs
- Staying only because of the years already put in.
An everyday example
A twelve-month gym membership, paid in full in January.
- The sunk cost thought
- By March the gym is a chore across town. The money is gone whether you go or not.
- The better question
- If a walk in the park or a cheaper gym near home would get you moving more, that is the answer.
- What changes
- Feeling guilty stops being the reason you choose, and you look at what you actually get from here on.
I paid 18,000 rupees, so I have to keep going.
If it were free today, would I choose this?
The trap
Quitting is not always the lesson.
- Dropping everything hard
- Some things are worth finishing because of what comes next, like the last semester of a degree. Judge the future, not the pain.
- Pretending the loss did not happen
- Admit the money is gone. It makes the next decision cleaner, and it teaches you something for next time.
Try this today
One question for one thing you keep paying for.
- The fresh-start test
- If the answer is no, write down what you would do instead, and when you will do it.
Starting from zero today, would I sign up for this?