Getting Past the Fallacy of Sunk Costs
This is the Modern Survival Guide, a guidebook I’m writing for things I think people need to know about living in the modern world. The views expressed here are mine, and mine alone. One of my views is that we often look at certain uses of resources the wrong way — specifically, how we view resources that have already been spent. There’s a logical fallacy here that most of us fall into from time to time, and it. touches. everything.
This isn’t a complicated concept, but it is counter-intuitive. In short, the “sunk cost fallacy” is the tendency of people to continue to throw resources at a project because they have already spent (sunk) resources on that project. It’s the error that is made when someone justifies a rash wedding by saying they’ve already bought the dress, or when someone makes another investment in a failing business because they’ve already sunk half their life savings in the company, or when a nation justifies continuing a war because so much blood and treasure has already been spent.
The consequence is, of course, that people continue to expend resources on the proverbial money pit, rather than putting those resources to better use. In this sense, the sunk cost fallacy is really about opportunity costs — rather than spending resources on this failing thing, we should be putting effort into that promising thing.
