The sunk cost fallacy is a common belief that we should continue on the same course of action because it has already cost us so much. The faulty logic seems to make sense – we’ve already bet so much on this poker hand that we may as well see it through.
But the fallacy is that we cannot win our way out of a mistake. Once it becomes obvious that it’s the wrong thing to do, whatever IT is, the only way to win is to stop playing. In business, this is especially true. There comes a point when your previous decisions or your current course of action is no longer the best way forward. Sometimes it’s early in a process. And sometimes it’s not. And it’s way better to recognize you’re on a losing course and step out early.
Sunk cost isn’t just about money. It’s about time, emotional energy, physical space – JoyGenea and Michelle discuss all the ways our decisions can continue to cost us over time.