Sunk Cost Fallacy
“I’ve lost $1000 to the slot machines already, so I can’t stop now or else I’ll never win my money back.”
You commit the sunk cost fallacy when you don’t want to give up on something that you’ve invested in even if it has become clear that the chances of it paying off are very low and sticking with it will lead to greater losses. It happens because people want to recoup resources and have a strong loss aversion. Rather than being used as a method of trying to win arguments, this fallacy is more often committed in one’s own thought processes (it is a cognitive bias).
Other examples:
Someone goes to a movie and realizes right away that they hate it, but stays because they don’t want the money they spent on the ticket and the time they spent driving there to be wasted (even though it means they will waste more time in the end).
Someone stays in an unhappy relationship because they’ve already invested a lot of time into it.
It’s important to keep an eye out for this fallacy because if we don’t know when to accept our losses and give up on something, we can end up losing much, much more. Rational decision-making should consider only future costs and benefits, not those irrecoverable by past expenses.
Note: If past spending has changed your current constraints or options, considering those constraints is not the sunk cost fallacy. For example, if you’re nearly finished a degree you no longer care about and you can’t afford to switch programs now, choosing to finish may be sensible. It is not a fallacy because the decision is based on your current financial limits and upcoming opportunities, not the sunk costs. Similarly, staying in a job you don’t like because you don’t have the financial freedom to quit without undue risk is a decision based on present and future outcomes, even if your situation was shaped by past costs. It’s a fallacy only when the deciding reason for sticking with something is “I don’t want the past costs to be wasted.”
