Why you should let go of the past
“If we stop now, everything we invested so far is lost.”, not realizing that everything they invested is lost anyway and has zero impact on the future. This is the reason why the bias is also known by the term “throwing good money after bad”.
A prominent example of the sunk cost fallacy gave the bias its other name “Concorde effect”. In 1962 the British and French government started a project to build a supersonic airplane. Before the plane was finished it became clear the project would not be profitable due to the immense costs. But even though they were fully aware of this issue, the two involved governments kept on pouring money into it and refused to exit the project. Their decision was influenced by their national pride and the biased argumentation that all invested money would be lost if they canceled the project.
Defeating the sunk cost fallacy means to think clearly and rationally . Sunk costs are always lost, no matter how you decide . But you can choose
to either stop before it’s too late or keep on spending and lose even more. I believe there are two important things to keep in mind:
But you can choose to either stop before it’s too late or keep on spending and lose even more. I believe there are two important things to keep in mind:
1. Don’t let your pride take over your decision making. Nobody likes admitting mistakes but keeping a project alive that is doomed to fail won’t save your ego from taking a hit. You’re just delaying it.
2. Accept what’s lost and move on. Your money is gone the moment you spend it. No matter if you watch the movie till the end or not, you don’t get your money back. Therefore, ignore the sunk costs and base your decision only on your assessment of the present and the future.
Many people I asked one of the initial questions said they decided for option B. Interestingly, some people say they would still choose option B after being told that option A is the more rational decision.
Somehow, people feel like they don’t lose the invested time, money or effort if they just keep on and finish what they started.
Even though it’s irrational to behave like this, it might sometimes make sense to do so. In a situation like the one in the cinema, leaving after 20 minutes would save you time. But how much is that time worth if the decision puts you in a bad mood because you feel like you just lost your money? Compare the value of the resources you would lose with the negative emotional impact the decision can have on you. Leaving the cinema is the rational thing to do but I would not recommend you doing so if it will leave you full of regret. What matters are the potential consequences of the decision. If people’s jobs or large amounts of money are at stake, you cannot afford to not act rational . But if it’s about spending an hour longer in the cinema you don’t need to force yourself into making the most rational decision. Sometimes, acting irrational just feels better.