What Is the Sunk-Cost Fallacy?
A fallacy is a mistaken belief. A sunk-cost fallacy is the mistaken belief that you should continue with something – a project, a hobby, a relationship – because you’ve already “sunk” so much “cost” into it. In other words, you’ve already spent so much time or money, effort, time, or emotion on something that you can’t bring yourself to leave it … even if that's healthier or better for you or your children.
Examples of sunk-cost fallacy in human life
As divorce experts, we first think of failing relationships when we hear the term “sunk-cost fallacy.” It happens:
- A married couple has been together for three decades, both of them miserable. Divorce is still possible, but so much time has gone by, and they own so much stuff together – including a house, a vacation home, and two cars. They also have kids and grandkids. Considering all the energy and effort they’ve devoted to their entwined lives, they just can’t seem to part ways.
- A couple owns a business together. They would do better as exes, but they’ve spent an exorbitant amount of time and energy on the business. They equate the business with their marriage, and they can’t imagine it any other way. Besides, they’ve taken out massive loans together, and it would take even more money to separate their finances at this point. So, they stay together.
- A couple has children together. They’re miserable, and in their misery, they model poor interpersonal relationships for their kids. They fight and nitpick at each other, which teaches the kids these behaviors are okay. Yet they stay together due to the belief that they have. Coming up with a marital settlement agreement that involves custody sharing sounds like even more work than they’ve already put into their relationship.
Of course, there are other examples of sunk-cost fallacies in human life. Do you know anyone who has lived out any of these stories?
- A student completes a major in something they’ve lost interest in. They discovered a different major they like more, but not until they were 3.5 years into an expensive college education. They can’t bring themselves to let the already-spent money go to “waste,” even though their current career trajectory won’t make them happy.
- A person stays in the same boring career until they retire. They could have changed careers at some point, but they didn’t because they figured they’d already spent so much money, time, and energy on the job – and it would require an even heavier investment to train for something new and actually find a more interesting vocation.
- A boss continues to employ a bad worker because that person has been with the company for years. The boss figures that the company has already invested a lot of time and money training this employee, so there’s no point getting rid of them now.
The fallacy applies to smaller scenarios as well. Consider this:
- You bought what you thought was a cream-filled donut only to discover it’s filled with jelly. You don’t like jelly donuts, but you eat the whole thing anyway because you paid for it, and it’s a shame for food to go to waste.
The term "sunk-cost fallacy" is often applied to events in the business world, but it can also be applied to human relationships.
Evaluating the costs you’ve sunk
As humans, we expend physical and emotional energy and money on things every day. These are the costs of our daily lives. They are generally unrecoverable, although it may have been possible for the person in the last example above to return their jelly donut for a cream-filled one.
It’s part of being human to factor our sunk costs into our decisions about what to do next. For example, the person who has been unhappily married for decades and shares children and grandchildren with their spouse factored all their sunk costs – time, money, emotion – into the decision to stay with their partner even though they’re not happy.
Look at your own life. What costs have you sunk? Were they worth it? Chances are some were worth it to you and some weren’t. Now, ask yourself this: Do you shy away from making big changes in your life because of the sunk costs you have already incurred?
If so, why?
Should you walk away?
When a person has spent considerable time, energy, or money on a cause, it’s even harder for them to walk away. But … should you walk away anyway?
That’s a question only you can answer. And maybe you’re struggling to answer it. That’s understandable. After all, as we’ve established, humans are averse to quitting things for which they’ve already sunk great cost.
Our best advice is to know yourself and to understand that the sunk-cost fallacy exists. It may or may not be affecting your life, and you may or may not decide to do something about it.
At Hello Divorce, we help people who have decided to invest in themselves. Sometimes, their decision to divorce comes despite many sunken costs. It’s not an easy decision to make, and we don’t think you should make it lightly. If you’re in this position, we encourage you to read our article, Should You Divorce? What to Do When You Can’t Make Up Your Mind.
Reference
How Susceptible Are You to the Sunk Cost Fallacy? Harvard Business Review.
