Is the Sunk Cost Fallacy affecting your decision making?

What if I told you that avoiding making a decision costing you more than you think.

It’s easy to get caught up in avoiding making a decision as you don’t want to lose an investment you’ve already made, whether that be money, time or resources.

However you forget about the big picture on what it could cost you in the future.

Being a human means that we’re not purely rational decision makers and we can often be influenced by our emotions. 

When you are more likely to continue an endeavour if you’ve already invested in it, even though it’s not the right decision anymore, you have stumbled across the Sunk Cost Fallacy.

This can be evident in your relationships, your career, your business, your university degree or basically any decision that you need to make. 

Even though something isn’t working, given that you have already invested in it; it is likely that you will feel guilty or regretful if you don’t follow through with it.

This leads you to continue to invest in something even though you know that it is no longer what is best for you. The benefits of staying outweigh the costs of leaving.

Except you continue to support your past decisions despite having the evidence that it’s no longer in our best interest to do so.

Psychologically if we don’t give up and continue to do it, we haven’t lost yet as the “loss” is yet to be incurred. 

There are so many versions of this: 

• You’ve invested into your business over the last 5 years, it is bleeding money and you're yet to see a profit however since you’ve put time, resources and money into it you don’t want to give it up as it will be a “sunk cost”. 

• You’ve invested in a relationship for 20 years but it hasn’t been working for the last 10 years yet you stick with it otherwise it will be “sunk cost” based on time invested. 

• You've invested significant effort into a project, but the company's direction has shifted. Despite the mismatch, you continue to advocate for the project to continue to avoid losing the work you've already put in, even though it no longer aligns with the new business direction turning into a "sunk cost."

• You’ve invested the last 4 years at university to become a lawyer then you get to the end of your degree or even halfway through and realise it’s not what you want to do but instead of changing careers you grapple with the investment of time, money and resources that it took to get you to where you are and stay in a profession you hate as it will be a “sunk cost” 

Some that are less invested but happen in our day to day lives.

• You go to a cafe and order something to eat, you don’t like the taste of it but you eat it anyway as you spent money on it. 

• You have been watching a TV series and by episode 6 it’s turned to shit but you keep watching it till the end of season 5 as you’ve already invested time into and that friend of yours said it would get better. 

You can’t recoup what you’ve already invested so you might as well just stick with it, right?

Wrong.

Most of the time you are reluctant to be viewed as wasteful or fear how others might perceive you if you choose to give up. 

You avoid bringing the loss into reality which goes against your best interest, impacts your mental health and your future happiness. 

Forgetting that the longer you don’t make a choice, the bigger the loss.

So ask yourself the question, is not making a decision costing you more than you might think?

If you answer yes to this question and you feel like you might be avoiding a decision due to the sunk cost fallacy, ask yourself the following questions.

• What decision have I been avoiding? 

• What is the reason that I have given to not make said decision? Is it due to the sunk cost fallacy? Investment of time, resources or money that you are unable to recoup…

Once you’ve established the decision and the reason you might be avoiding it, follow up exploring the below additional questions.

• What more could I lose if I quit now?

• What fears do I have about quitting?

• What am I afraid of?

• Will I be happier staying or leaving?

• Who am I afraid of disappointing?

• Am I willing to disappoint them for my happiness? 

When you look at it from the perspective of what you stand to lose in the future versus what you have already lost, it can completely change how you approach your decision making.

Remember life is a matter of choices, every choice you make, makes you.