Sunk Cost

You’ve been reading this book for 200 pages. It’s terrible. But you’re too far in to quit now.

You’ve been in this relationship for three years. It’s not working. But you’ve invested so much.

You’ve been pursuing this career for a decade. You hate it. But all that education, all that experience - you can’t just throw it away.

This is the sunk cost fallacy. And it keeps people trapped in situations they should leave.

What sunk costs are

A sunk cost is anything you’ve already invested that cannot be recovered:

Time spent
Money paid
Energy expended
Opportunities foregone
Emotional investment

These costs are gone. You can’t get them back. The money is spent. The time has passed. The energy is used.

The fallacy is letting sunk costs influence future decisions.

Why it’s irrational

Rationally, only future costs and benefits should matter for decisions.

The question isn’t “what have I invested?” It’s “going forward, is this the best choice?”

Whether you’ve spent 10 minutes or 10 years on something is irrelevant to whether you should continue. The past is past. Only the future can be changed.

But humans aren’t rational. We have loss aversion - losses hurt more than equivalent gains feel good. Abandoning a sunk cost feels like confirming a loss. Continuing feels like there’s still hope to recover the investment.

So we continue. Even when continuing is clearly worse.

How sunk costs trap you

Relationships: “I’ve invested so much in this person.” But the time you’ve spent together doesn’t make future time together better. If the relationship isn’t working, past investment isn’t a reason to stay.

Career: “I’ve trained for this for years.” But past training doesn’t make future work enjoyable. If you hate your job, your education is sunk cost.

Projects: “I’ve already put so much into this.” But past effort doesn’t make completion worthwhile. If the project isn’t valuable, more effort just adds more sunk cost.

Possessions: “I paid so much for this.” But past price doesn’t create present value. If you don’t use it, it’s clutter regardless of what you paid.

Beliefs: “I’ve believed this my whole life.” But time spent believing something doesn’t make it true. If evidence contradicts your belief, your investment in the belief is sunk.

The real cost of honoring sunk costs

When you continue something because of past investment, you pay twice:

The original sunk cost (gone regardless)
The ongoing cost of continuing something that isn’t working

You don’t recover the sunk cost by continuing. You just add to your losses.

Every day in a bad relationship is another day lost. Every year in a wrong career is another year lost. Sunk costs compound when you let them drive decisions.

The “fresh start” test

Ask: “If I were starting fresh today - with no past investment - would I choose this?”

If you weren’t already in this relationship, would you start it? If you weren’t already in this career, would you enter it? If you hadn’t already bought this, would you buy it again?

If the answer is no, past investment shouldn’t change your mind.

This is hard to apply because you’re not actually starting fresh. The investment feels real and important. But it only feels important - it’s not actually relevant to what you should do next.

Why we honor sunk costs

Loss aversion. Quitting feels like admitting the investment was wasted. We’d rather continue than confirm the loss.

Consistency. We want our current actions to align with past actions. Changing course feels like admitting we were wrong.

Identity. Past investments become part of who we are. The career, the relationship, the belief - it’s not just a choice, it’s identity. Abandoning it threatens who we think we are.

Hope. Maybe if we invest just a little more, we can turn it around. The sunk cost will become worthwhile. (It usually won’t.)

Waste aversion. “Waste” feels wrong. Walking away feels wasteful. But the waste already happened - continuing doesn’t unwaste it.

Working with sunk costs

1. Name it

When you notice yourself thinking “but I’ve already invested…” - recognize this as sunk cost thinking.

“I’m being influenced by sunk costs right now.”

Naming it creates distance.

2. Separate past from future

Ask two questions:

What has this cost me? (Sunk cost - irrelevant)
What will it cost/benefit going forward? (Actually relevant)

Only the second question matters for deciding what to do.

3. Reframe quitting

Quitting isn’t confirming loss. The loss already happened.

Quitting is refusing to add more loss. It’s cutting your losses. It’s the rational response to a bad situation.

“Quit while you’re behind” is actually good advice sometimes.

4. Consider opportunity cost

What are you giving up by continuing?

Every day in the wrong relationship is a day not finding the right one. Every year in the wrong career is a year not building the right one.

The sunk cost fallacy blinds you to what you’re missing by staying.

5. Forgive past decisions

You made the best choice you could with what you knew at the time. The investment wasn’t stupid - it made sense then.

But circumstances change. You change. Information changes. Decisions that were right then can be wrong now.

Continuing out of guilt for past decisions helps no one.

The liberation

Walking away from sunk costs is freeing.

You’re no longer trapped by the past. You can make decisions based on what’s actually best for your future. You stop throwing good time/money/energy after bad.

The sunk cost is already gone. Let it go. Look forward. What’s the best choice from here?

Related: Decisions (making better choices), Identity (when past choices become identity), Cognitive Biases (why we think irrationally)