A Confession
Let me tell you about last Tuesday. I sat through the final 45 minutes of a movie so aggressively mediocre that even the actors looked like they wanted to leave. The plot had abandoned coherence around the 20-minute mark. The love interest had the charisma of a damp sock. And the twist ending was that there was no twist ending, which is not a twist; it's just disappointment.
But did I turn it off? No. No, I did not. Because I had already invested 75 minutes of my finite, irreplaceable human life into this cinematic disaster, and walking away would have meant those 75 minutes were wasted.
So instead, I invested 45 more minutes. Which were also wasted. But at least I wasted them consistently.
This, dear reader, is the sunk cost fallacy. And you do it too. Don't pretend you don't.
What Is the Sunk Cost Fallacy, Exactly?
The sunk cost fallacy is the tendency to continue an endeavor once an investment of money, effort, or time has been made. The logic — and I use that word with extreme generosity — goes something like this: "I've already put so much into this, I can't stop now."
Rational economic theory says this is bonkers. A "sunk cost" is any cost that has already been incurred and cannot be recovered. It's gone. Evaporated. It has left the building and is not coming back. The only thing that should matter when making a decision is the future costs and benefits. What's done is done.
But your brain doesn't care about rational economic theory. Your brain cares about not feeling like an idiot.
Here are some sunk cost classics you might recognize:
- Finishing a terrible book because you're already on page 200. (The remaining 150 pages will not suddenly become Tolstoy.)
- Eating the rest of a massive meal you don't want because you paid $28 for it. (Your stomach does not accept refunds either.)
- Staying in a relationship that makes you miserable because you've been together for three years. (Those three years are gone whether you stay or leave. This isn't a loyalty points program.)
- Continuing to repair a car that costs more in repairs per year than a new car payment would. (At some point, the car is not a vehicle; it's a hostage situation.)
- Keeping clothes you've never worn because they were expensive. (They are not appreciating in value. They are depreciating in your closet while silently judging you.)
The sunk cost fallacy is essentially your brain running the logic: "I can't have been wrong THEN, so I'll be wrong NOW to prove it." It's like doubling down on a bad bet, except the casino is your entire life and the dealer is your own prefrontal cortex.
The Study: Arkes & Blumer (1985)
In 1985, psychologists Hal Arkes and Catherine Blumer decided to rigorously demonstrate what anyone who has ever finished a bad movie already knew: humans are profoundly, reliably, almost impressively irrational about sunk costs. Their paper, "The Psychology of Sunk Cost," is one of those rare academic papers that reads less like science and more like an intervention.
They ran ten — ten — experiments. These weren't people just theoretical armchair musings. They went out and proved, with increasingly creative methods, that people throw good money after bad, good time after bad, and good decisions after bad, all because they can't stand the thought of "wasting" something that's already gone.
Let's look at the two most famous ones.
Experiment 1: The Theater Ticket Problem
This is the one that gets cited in every psychology textbook, and for good reason — it's beautifully simple and devastatingly revealing.
Participants were given the following scenario: Imagine you've bought a ticket to a ski trip in Michigan for $100. A few weeks later, you buy a ticket for a ski trip in Wisconsin for $50. Then you realize: both trips are on the same weekend. You can't return either ticket, can't sell them, and can't go on both. You have to choose one.
Here's the kicker: the $50 Wisconsin trip is described as being the more enjoyable one. Better slopes, better weather, better everything. You'd have more fun in Wisconsin. Period.
The majority of participants chose the $100 Michigan trip. Let that sink in. They chose the less enjoyable option because they'd spent more money on it. They actively opted for less fun to avoid feeling like they'd wasted a bigger investment.
From a rational standpoint, the money is gone either way. You lose $100 and $50 regardless of which trip you pick. The only variable that matters is: which trip will you enjoy more? And they knew the answer. They just couldn't bring themselves to act on it.
This is like choosing to eat at a restaurant you know is bad because the Uber there cost more. It makes zero logical sense. But it makes perfect emotional sense, because your brain has conflated "I spent money on this" with "this has value," and abandoning it feels like admitting you made a mistake.
And your brain would rather eat a mediocre steak than admit it chose the wrong restaurant.
Experiment 2: The Ohio University Basketball Season Tickets
This one's even better because it happened in the real world, not in a hypothetical scenario. Arkes and Blumer went full field experiment on this one.
They set up shop at the Ohio University theater box office. When people showed up to buy season tickets for the university's theater performances, some buyers randomly received a small discount ($2 off), others got a larger discount ($7 off), and a control group paid full price. Nobody knew they were in a study.
Then the researchers tracked how many shows each group actually attended over the course of the season.
During the first half of the season, the full-price group attended significantly more shows than either discount group. People who paid more money showed up more, even though the shows were identical regardless of what you'd paid for your ticket.
Interestingly, the effect faded in the second half of the season — suggesting that sunk cost effects weaken over time as the original purchase becomes a more distant memory. Your brain eventually stops holding the receipt over your head.
Think about what this means. The full-price people didn't enjoy the shows more. They didn't have better seats. They watched the exact same performances as the discount people. But they felt a stronger pull to attend because they'd invested more money — and skipping a show would feel like throwing that money away.
This is the exact same reason you've eaten leftover pizza you didn't even want, finished a gym class you were hating, and kept reading that 900-page novel about a whale even though you stopped caring about the whale 600 pages ago. You paid for it, so now you must suffer for it. Congratulations, you've turned a transaction into a penance.
Why We Fall for It
So if the sunk cost fallacy is so obviously irrational — if a five-year-old could theoretically point out that "you can't un-spend money" — why does virtually every human on the planet fall for it? Several psychological mechanisms conspire to make you beautifully, reliably terrible at this.
1. Loss Aversion
Daniel Kahneman and Amos Tversky showed that losses hurt roughly twice as much as equivalent gains feel good. Losing $100 feels worse than finding $100 feels great. Abandoning a sunk cost feels like a loss, even though rationally, the loss already happened. Walking out of the movie doesn't create the loss; the loss was created when the movie turned out to be garbage. But your brain doesn't process it that way. Your brain processes it as: "I am now actively choosing to lose."
2. Waste Aversion
Humans have a deep, almost primal hatred of waste. We're the species that keeps rubber bands in a drawer "just in case," stores plastic bags inside other plastic bags, and finishes meals we don't want because "there are starving children somewhere." The idea of resources going unused makes us physically uncomfortable. Abandoning a sunk cost triggers this waste alarm at maximum volume.
3. The Identity Problem
Here's the one nobody talks about enough. Cutting your losses requires admitting you made a bad decision. And admitting you made a bad decision requires updating your self-image from "person who makes good decisions" to "person who sometimes makes bad decisions and that's okay."
Most people would genuinely rather lose more money than revise their self-concept. Which, when you think about it, is itself a pretty bad decision. It's recursive irrationality. It's bad decisions all the way down.
4. Completion Bias
Your brain really, really likes finishing things. There's a reason "completionism" is a whole personality trait in gaming. An unfinished task creates what psychologists call the Zeigarnik Effect — a mental tension that nags at you until the task is done. Abandoning a sunk cost means leaving something unfinished, and your brain treats that like an open browser tab it can never close.
Real-World Sunk Costs (The Uncomfortable Section)
Bad movies and ski trips are fun examples, but the sunk cost fallacy does its real damage in the big stuff. Here's where it gets uncomfortable.
Relationships
"But we've been together for seven years." This is perhaps the most heartbreaking application of the sunk cost fallacy. People stay in relationships that are making them genuinely unhappy because leaving would mean those years were "wasted." But those years are gone whether you stay or go. The only question that matters is: will the next seven years be good? And if the answer is no, then staying isn't honoring your investment. It's just adding to the pile.
Careers
"But I spent four years getting this degree." / "But I've been at this company for a decade." / "But I've built my whole identity around being a [insert job title]." Career sunk costs are particularly vicious because they're tangled up with identity (see point 3 above). Leaving doesn't erase your experience or skills. But it does require mourning a version of your life that didn't work out, and that's genuinely hard.
Projects
Every startup founder, every author with a half-finished manuscript, every home renovator who's in too deep — they all know this feeling. The project isn't working. The evidence says it won't work. But you've already invested so much that stopping feels like failure, while continuing feels like perseverance. The problem is that "perseverance" and "stubbornness" are the same behavior viewed through different lenses, and the sunk cost fallacy is very, very good at handing you the wrong lens.
Meals
You ordered too much food. You are full. Your body is sending clear signals that it has enough fuel to power a small spacecraft. But you paid $45 for this tasting menu, and by God, you will taste every course even if it kills you. Your stomach will not be the one to waste this investment. You will simply override a million years of satiety signaling because the prix fixe demands it.
The Concorde Fallacy: When Governments Do It
The sunk cost fallacy is so well-documented that biologists actually have their own name for it: the Concorde Fallacy, named after the British-French supersonic jet that became the most famous money pit in aviation history.
The Concorde was a marvel of engineering and a catastrophe of economics. It was clear relatively early on that the jet would never be commercially viable. The costs were astronomical, the market was limited, and the sonic booms meant it couldn't fly supersonically over land (which is, you know, where most of the land is).
But the British and French governments kept pouring money in. Why? Because they'd already poured so much money in. The logic was: "We've spent billions. We can't stop now." Which is exactly the logic of someone on page 200 of a bad book, except the book costs $13 billion and it's funded by taxpayers.
The Concorde eventually entered service, flew for 27 years, and was retired in 2003 having never turned a profit. The total cost of the program, adjusted for inflation, was enough to make economists weep openly at conferences. It is, in every meaningful sense, the sunk cost fallacy at nation-state scale.
If it makes you feel any better about finishing that bad Netflix movie, the governments of two entire countries did the same thing, except their bad movie cost $13 billion and flew at Mach 2. Scale is the only difference between you and an international boondoggle.
How to Actually Escape Sunk Cost Thinking
Okay, so your brain is wired to throw good money after bad, good time after bad, and good emotional energy after bad. Wonderful. Is there anything you can actually do about it?
Yes. But it requires building some mental habits that feel deeply unnatural at first.
1. The "Fresh Eyes" Test
Ask yourself: "If I were starting from scratch today — with no prior investment — would I choose this?" If the answer is no, that's extremely useful information. You wouldn't start watching this movie now, knowing what you know. You wouldn't take this job now, knowing what you know. You wouldn't order this much food now, knowing what you know. The only reason you're continuing is the ghost of a decision that has already passed.
2. Reframe "Quitting" as "Choosing"
The sunk cost fallacy thrives on the narrative that stopping = failing. But you can flip that. Stopping a bad investment isn't quitting. It's choosing to redirect your resources toward something better. It's not "I wasted three years." It's "I'm saving the next thirty." That's not failure. That's math.
3. Set Kill Criteria in Advance
Before you start a project, a subscription, a relationship milestone, or a Netflix series, decide in advance what would make you stop. "If I'm not enjoying this by episode 3, I'll quit." "If this project doesn't hit [metric] by [date], we pivot." Pre-commitment bypasses the in-the-moment emotional fog that sunk costs create.
4. Practice Small Quits
Walk out of a bad movie. Leave food on the plate. Put down a boring book at page 50. These low-stakes exercises build the mental muscle for the high-stakes moments when quitting actually matters. Think of it as cognitive behavioral therapy for your wallet.
5. Talk to Someone Who Has No Investment
Sunk costs warp your judgment because you're the one who's invested. Someone with no skin in the game can see clearly what you can't. This is why advisors, therapists, and that one brutally honest friend are so valuable. They look at your situation without the distortion field of prior investment and say, "Why are you still doing this?" And sometimes that question is the most helpful thing anyone can ask you.
The Squeeze
Arkes and Blumer showed us something uncomfortable in 1985: humans reliably make worse decisions when they've already invested in something, precisely because they've already invested. We choose less enjoyable ski trips, attend shows we don't want to see, and fund supersonic jets that will never turn a profit — all to avoid the psychological sting of "wasting" resources that are already gone.
The sunk cost isn't the trap. The trap is believing you can un-sink it by sinking more.
The most powerful financial, emotional, and strategic skill you can develop is the ability to say: "This is no longer working, and I'm allowed to stop." Not because those past investments didn't matter. They did — they brought you information. The information is: it's time to go.
So the next time you're 90 minutes into a terrible movie and your brain whispers, "But we've come so far..." remember: you haven't come anywhere. You've been sitting on a couch. And the remote is right there.
Pick it up.
Reference: Arkes, H. R., & Blumer, C. (1985). The psychology of sunk cost. Organizational Behavior and Human Decision Processes, 35(1), 124–140.