The Sunk Cost Fallacy: Knowing When to Quit

The Concorde Error

The British and French governments continued to fund the Concorde supersonic jet long after it became clear it would never be profitable. Why? Because they had already spent so much money. They didn’t want the investment to “go to waste.” This is the Sunk Cost Fallacy. It is the irrational decision to continue a behavior or endeavor as a result of previously invested resources (time, money, or effort).

Rationality vs. Emotion

A rational decision maker looks only at future costs and benefits.

• Rational: “Will spending $100 more give me a good return?”
• Irrational (Sunk Cost): “I’ve already spent $1000, so I have to spend$100 more or the $1000 was for nothing.”

Cutting Your Losses

The hardest lesson in life is knowing when to fold. Whether it’s a university degree you hate, a relationship that isn’t working, or a book you’re 100 pages into but bored by—the time you spent is gone forever. Don’t throw good time after bad. The most valuable asset you have is the future, not the past.