The Sunk Cost Fallacy: Why "I've Already Put So Much In" Is the Wrong Reason to Keep Going

A cost is "sunk" once you’ve spent it and can’t get it back, no matter what you decide from here. The sunk cost fallacy happens when that unrecoverable spending influences a decision that should be based on current facts and future opportunities. You might think, "I’ve already put so much money into this, I can’t stop now." But that cash is gone, whether you keep going or not. The real question is whether starting fresh today is the best use of your remaining resources.

This issue pops up all the time in investing. People keep pouring money into a losing position just because they’ve already invested so much, not because the current facts support it. It happens outside of investing too. You might stay in a dead-end job or keep pushing a failing project because of the time you’ve already put in, rather than because it’s the right choice moving forward. The pattern is always the same. Past spending is treated like it still matters when making the right decision now, but it doesn’t.