Have you ever invested a lot of time, money and love into something that wasn’t working out, but you continued to persist, exactly because of that investment?
The sunk cost fallacy is our commitment bias when we continue in our old ways despite new evidence suggesting that our way isn’t the best course of action. We fail to consider that whatever resources we have invested will not be recovered; by continuing, we are only increasing the cost of investment but not the odds of our success.
Here are several situations.
A typical, but innocent example of sunk cost fallacy is when you continue to read a 600-pages book that you absolutely hate, but you persist because it was expensive, smart (they say), and even signed by the author.
Another, less innocent example is when you have invested money in a marketing campaign that hasn’t brought any results in months but you can’t quit, because it doesn’t look good to quit now, and a catch 22: you have invested so much money already.
Last, and perhaps the toughest one is when you don’t want to quit a relationship, because you have known this person for so long and again – invested so much, despite things ‘always being the same’, and not in a good way.
The question is when to pull the plug and move on?
A simple lesson from the stock market teaches us that
… what matters is not how much you paid for it (the stock), but how it will perform in the future.
If you continue just because of your investment, but the evidence suggests (numbers & qualitative data) that there will be no future benefits that justify the cost, perhaps it’s time to pull the plug and move on.
So read a book that truly interests you, create a new marketing campaign and learn what didn’t work in the first one, and spend time in better relationships.
Image: Mine.
Rolf Dobelli, Art Of Thinking Clearly, Harper Collins, 2014.