Short psychological answer. No fluff.
- We consider our previous engagement in the context that no longer brings us joy — be it a relationship, a job, the perspective of participating in a social event, etc — an investment.
- Time, emotions, or money are the main types of resources that we pour into different aspects of our lives.
- We hate losing our initial investment.
- So, in an attempt to avoid loss, we engage in irrational thinking.
- Enter the Sunk Cost Fallacy — a flawed thinking pattern that makes us pursue an inferior alternative or option when we consider the initial investment to be of significant proportions and also, nonrecoverable.
- This leads to bad decision-making and its effects can be seen in all aspects of life.
Effects of Sunk Cost Fallacy
- In general, the Sunk Cost Fallacy makes us stay in bad contexts, even though leaving would be more likely to generate better results for us and others.
- It leads to various levels of avoidable unhappiness.
- People may stay in unhappy marriages because they’ve already invested too much time and feelings.
- Staying in bad jobs may be a result of not wanting to lose all those years of training and the efforts of moving up the ladder.
- You go on a trip even though you no longer feel like it because you won’t get a refund on your tickets.
- We don’t only attempt to protect our own investments.
- We try to do the same for the investments of others, a study found.
- For example, a person may still attend a cultural event even when they don’t want to if their friend gifted them the tickets.
Avoiding the Effects
- The first step is to identify the fallacy.
- When you are no longer happy in a context, analyze the reasons why you’re staying.
- If your “why” is linked to past investments, then you are likely dealing with the sunk cost fallacy.
- Compare your state of unhappiness to the possible better options.
- Can anything be done in the present situation to turn the unhappiness into one of those better options?
- If reasonable alternatives have been depleted, acknowledge that staying in that context will only increase your costs or losses.
- Cut your losses there and move toward a better investment.