Letās talk about something called theĀ āsunk cost fallacyā.
Say that youāve bought a concert ticket for $50 for a band that you donāt know that well. Half an hour into the show, you realize that you donāt actually enjoy the music and you arenāt having a good time - instead of leaving the concert to go do something else, however, you sit through the remaining hours of the concert because you donāt want toĀ āwasteā the cost of the ticket.Ā
Congratulations, youāve just fallen victim to the sunk cost fallacy.
TheĀ āsunk cost fallacyā is something that all humans are prone to when we make decisions. Simply put, itās the human tendency to consider past costs when we make choices, even when those costs are no longer relevant. When youāre deciding whether or not to stay at that concert you arenāt enjoying, you will likely consider the cost of the ticket when youāre making your decision - for instance, youād probably be a lot more willing to leave a $5 concert that you arenāt enjoying than a $50 concert that you arenāt enjoying. But taking the cost of the ticket into account at all is a mistake.Ā
When youāre making a rational decision, the only thing that matters is the future. Time, effort and money that youāre spent up until that point no longer matter - it doesnāt make sense to consider them, because no matter what you decide, you canāt actually get them back. They areĀ āsunkā costs. If you decide to stay at that concert, you are out $50 and youāll have a mediocre evening. If you decide to go leave and do something more fun, you are out $50 and youāll have a better evening. No matter what you choose, you have lost $50 - but choosing to leave the concert means that you havenāt also spent an evening doing something you donāt like.
The sunk cost fallacy is sometimes also described asĀ āthrowing good money after badā - people will waste additional time, resources and effort simply to justify the fact that theyāve already wasted time, resources and effort, even if it leaves them worse off overall.Ā
Common examples of sunk cost fallacy in everyday life include:
refusing to get rid of clothes that donāt fit or that you never wear because they were expensive
going to an event that you no longer want to go to because you already bought the ticketĀ
spending more and more money on repairing a car or computer (or something else that depreciates in value over time) instead of buying a new one because you donāt want to waste the money you put into earlier repairs
continuing to watch a movie or TV show you arenāt enjoying anymore because youāve already watched part of itĀ
finishing a plate of food that youāre not enjoying or are too full to enjoy, because you donāt want to waste it
refusing to get rid of unused, unwanted or broken items in your home because the items were expensive
Perhaps the most damaging example of sunk cost fallacy in everyday life, however, is relationships.Ā
People often use the length of a relationship to justify staying in it. Youāve probably heard this logic - you may even have used it yourself:
āI canāt break up with him or the two years we spent together will be for nothing.ā
āIf I leave her, it will mean I wasted the five years I spent with her.ā
The reality, though, is that staying in a mediocre relationship doesnāt āgive you backā the time youāve already invested in that relationship. It just makes the relationship longer. If you stay in a bad relationship for five more years to avoidĀ āwastingā the first two, you havenāt actually made those first two years worthwhile - youāve simply spent seven years of your life in a bad relationship. Thereās nothing we can do to recover time and effort (and in most cases, money) that weāve already spent. But we can forgive ourselves, and we can stop letting our past mistakes continue to define our futures.Ā