Lesson 14: Sunk Cost Fallacy

Spot the Faulty Logic #

“I’ve already read 200 pages of this book and it’s terrible, but I have to finish it because I’ve invested so much time already.”

Discussion: Talk with your teacher about this example. What seems wrong with this reasoning?

How/Why It’s Often Used #

We hate to feel like our past efforts were wasted. It’s psychologically painful to admit that time or money we’ve already spent is gone and can’t be recovered. So we keep going, hoping to somehow “redeem” our investment, even when quitting would actually be the smarter choice.

This fallacy affects all kinds of decisions: finishing bad movies, staying in activities we don’t enjoy, or continuing projects that aren’t working. Businesses fall into this trap too, pouring more money into failing projects because they’ve already invested so much.

Sunk Cost in Action #

Did you spot the faulty logic? #

Those 200 pages are already read - that time is gone. The real question is: “Would I rather spend my next few hours finishing a book I don’t enjoy, or doing something else?” The past investment doesn’t change what the best future choice is.

Second Example #

“I know this movie is boring, but we already paid for the tickets, so we have to stay until the end.”

The Flaw #

The ticket money is spent either way - you don’t get it back by staying. The question is whether the next two hours are better spent watching something you don’t enjoy or leaving to do something else. The past purchase shouldn’t trap you into future misery.