Showing posts from December, 2023

The Sunk Cost Fallacy: Why It Pays to Let Go

In the realm of decision-making, the sunk cost fallacy stands as a formidable adversary to rational thinking. It's a cognitive bias that urges individuals to continue investing in a failing endeavor simply because they have already dedicated resources to it. In this blog, we will explore what sunk costs are, why they can be detrimental, and why it is crucial to avoid falling into the sunk cost trap. Understanding Sunk Costs: Sunk costs refer to the expenditures that have already been made and cannot be recovered. These can be in the form of time, money, or effort invested in a project, business, or any other venture. The key principle to grasp is that these costs are irretrievable, regardless of the decision made moving forward. The Sunk Cost Fallacy: The sunk cost fallacy arises when individuals, businesses, or organizations base their decisions on the amount of resources already invested, rather than the potential future benefits. In essence, it's the tendency to throw good m