Sunk-Cost Fallacy
The sunk-cost fallacy is continuing because of resources already spent and unrecoverable, rather than comparing the future costs and benefits of continuing with those of stopping.
THE IDEA
Description
The fallacy occurs when an unrecoverable past investment is treated as a reason to continue. The relevant comparison is what continuing or stopping would cost and produce from this point onward.
Logical Form
Resources have already been spent on this course of action. Therefore, we should keep investing so that the past expenditure will not have been wasted.
Example #1
A person continues to pour money into a failing business because they've already invested $1000, even though further investment is likely to result in greater overall losses.
Explanation #1
What this person does not realize is that moving forward will most likely result in the loss of much more time and money. This person is thinking short-term, not long-term, and is simply trying to avoid the loss of the $1000, which is fallacious thinking.
Example #2
There are ministers, priests, pastors, and other clergy all around the world who have invested a significant portion of their lives in theology, who can no longer manage to hold supernatural beliefs – who have moved beyond faith. Hundreds of them recognize those sunk-costs and are searching for the best way to move on (see http://www.clergyproject.org ) whereas many others cannot yet see the benefits of ending the bad investment, and accepting the loss.
Explanation #2
Continuing in a religious vocation is not itself evidence of this fallacy. The question is whether the decision rests on unrecoverable past effort rather than current beliefs and the future consequences of staying or leaving.
Exception
If careful evaluation of the hypothetical outcomes of continued investment versus accepting current losses and ceasing all further investment have been made, then choosing the former would not be fallacious.
Tip
Is there any part of your life where you continue to make bad investments because you fear losing what was already invested?
When to use it
Deciding whether to continue funding a struggling business venture versus cutting losses.
Deciding whether to stay in a degree program you dislike because you've already invested years and tuition.
Deciding whether to end a long-term relationship that is no longer fulfilling due to the time and emotions invested.
Deciding whether to continue with a technological project that has consumed significant resources but is failing to meet objectives.
FROM THEORY TO EVERYDAY LIFE
In practice
Failing Business Investment
A person continues to invest money in a failing business because they have already invested $1000, ignoring that further investment will likely lead to even greater losses.
Clergy and Belief
A clergy member no longer holds the beliefs central to their role but feels compelled to remain solely because of years invested in training. That reasoning illustrates a sunk-cost error. Present responsibilities, livelihood, and the practical costs of leaving are separate considerations that may legitimately affect the decision.
A MOMENT TO REFLECT
Put it to work.
Is there any part of your life where you continue to make bad investments because you fear losing what was already invested?
How can you distinguish between a prudent continuation of investment and the sunk-cost fallacy?
What criteria can you use to decide whether to cut your losses in a project or relationship?
CONTINUE THE CONVERSATION
Source texts
- Logically Fallacious - The Ultimate Collection of Over 300 Logical Fallacies