Sunk cost fallacy

Consider a situation; You spent Rs. 15000 on tickets and hotel in Goa for a new year’s party with your friends. Sun, sand, water and beach; it is going to be an epic way to welcome the new year with your newly acquired first job money and you have spent months coordinating and planning for it.

However, one day before going, you catch a bad fever and high temperature, the doctor advises you rest for the week and you have a decision to make. Will you go or stay? And why should you go or stay? Think about it.

If you chose to go (because you had already invested so much time and money in it), then you fell victim to the sunk cost fallacy.

People fall prey to the sunk cost fallacy all the time, and it really gets them bad. Simply put, the sunk cost fallacy is when we continue an action because of our past decisions (time, money, resources) rather than a rational choice of what will maximise our utility at the present time.

Being familiar with the Sunk Cost Fallacy can help you take the right decisions

All of the following are examples of sunk cost fallacy:

• Continuing to eat food at a restaurant because you already ordered it
• Keep watching this terrible movie because I’ve watched an hour of it already.
• Continuing with a bad job because you have already spent 'x' number of years with the company
• Keep on eating junk food all day because you already ruined your diet by having cake in the morning

The sunk cost fallacy is bad because it prevents us from making rational decisions that can actually be better for the time. This is the reason why people continue with bad choices (like smoking because they have “already spoiled their lungs”) instead of making corrections starting at least NOW.

Try to be more mindful of the sunk cost fallacy. Remember that putting a bad decision on top of another bad decision will not make it good. Keep that in mind and always view things from a rational lens of the NOW.

A note before I close: continuing with something is not always bad, but the decision to continue with something must be based more on the facts right now instead of what happened in the past.