Letâs talk about something called the âsunk cost fallacyâ.
Say that youâve bought a concert ticket for $50 for a band that you donât know that well. Half an hour into the show, you realize that you donât actually enjoy the music and you arenât 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 donât want to âwasteâ the cost of the ticket.Â
Congratulations, youâve just fallen victim to the sunk cost fallacy.
The âsunk cost fallacyâ is something that all humans are prone to when we make decisions. Simply put, itâs the human tendency to consider past costs when we make choices, even when those costs are no longer relevant. When youâre deciding whether or not to stay at that concert you arenât enjoying, you will likely consider the cost of the ticket when youâre making your decision - for instance, youâd probably be a lot more willing to leave a $5 concert that you arenât enjoying than a $50 concert that you arenât enjoying. But taking the cost of the ticket into account at all is a mistake.Â
When youâre making a rational decision, the only thing that matters is the future. Time, effort and money that youâre spent up until that point no longer matter - it doesnât make sense to consider them, because no matter what you decide, you canât actually get them back. They are âsunkâ costs. If you decide to stay at that concert, you are out $50 and youâll have a mediocre evening. If you decide to go leave and do something more fun, you are out $50 and youâll have a better evening. No matter what you choose, you have lost $50 - but choosing to leave the concert means that you havenât also spent an evening doing something you donât like.
The sunk cost fallacy is sometimes also described as âthrowing good money after badâ - people will waste additional time, resources and effort simply to justify the fact that theyâve already wasted time, resources and effort, even if it leaves them worse off overall.Â
Common examples of sunk cost fallacy in everyday life include:
refusing to get rid of clothes that donât 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 ticketÂ
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 donât want to waste the money you put into earlier repairs
continuing to watch a movie or TV show you arenât enjoying anymore because youâve already watched part of itÂ
finishing a plate of food that youâre not enjoying or are too full to enjoy, because you donât 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.Â
People often use the length of a relationship to justify staying in it. Youâve probably heard this logic - you may even have used it yourself:
âI canât break up with him or the two years we spent together will be for nothing.â
âIf I leave her, it will mean I wasted the five years I spent with her.â
The reality, though, is that staying in a mediocre relationship doesnât âgive you backâ the time youâve already invested in that relationship. It just makes the relationship longer. If you stay in a bad relationship for five more years to avoid âwastingâ the first two, you havenât actually made those first two years worthwhile - youâve simply spent seven years of your life in a bad relationship. Thereâs nothing we can do to recover time and effort (and in most cases, money) that weâve already spent. But we can forgive ourselves, and we can stop letting our past mistakes continue to define our futures.Â
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