I first heard about the Sunk Cost Fallacy from Freakonomics – if you haven’t read it (or listened to the podcast), I highly recommend it.
The Sunk Cost Fallacy is a pretty simple, but mind-blowing (at least to me) concept. In economics, Sunk Cost is a cost that has already been incurred – and therefore can never be recovered. (Straight from Wikipedia – credit where credit is due). The Sunk Cost Fallacy is where an individual is so attached to the sunk cost, they are unwilling to abandon it – even if the course they are on is not ideal. This, much like Analysis Paralysis, is one of my favorite psychological concepts because it directly affects me.
The important thing to remember here is that the word “cost” in this fallacy doesn’t always mean money – often it can mean time. We become attached to a thing and we’re unwilling to let it go because we’ve invested time into the thing. Could be a project, a relationship, a career – all of these things people are often commonly guilty of not wanting to abandon, because of the time (and effort) invested. I’ll personally admit I’ve done this myself and it’s a hard cycle to break. I’m sure we all have at some point.
The reason I’m mentioning the Sunk Cost Fallacy now is I think it directly relates to my Analysis Paralysis posting – and honestly they very much go hand in hand. The reason why I often have Analysis Paralysis is because I’m afraid of the Sunk Cost Fallacy. I don’t want to spend time learning the ‘wrong’ thing and then have to go back and learn the ‘right’ thing. So I spend countless hours trying to figure out what the right thing is, before I’ll even start learning the thing. In the end, all I’ve ended up doing is wasting time – the exact thing I was trying to avoid in the first place.
For me, the way to break the cycle is to realize that the time invested in the thing isn’t lost – it’s a lesson learned in what not to do. Sure, I put a lot of time into this – and yeah, I didn’t get the result I was looking for, but I eliminated some options that turned out to be the wrong ones. The next time I start down this path, I’ll be wiser and possibly won’t make the same mistakes I made before. It’s also important to realize that when you’re having that internal struggle – the one that always goes like “I really don’t like this – this feels wrong. But if I put more time in, maybe it’ll get better”, you may be caught up in the Sunk Cost Fallacy.
Before I end this post I do want to make it clear that this doesn’t mean that when something is sucking in a project that it’s always the right idea to abandon ship. For example, let’s say your goal is to hit the gym 3 days a week for a year – it’s going to suck for a bit. Probably a long bit. That’s not time wasted, the sucking part is the precursor to being awesome in that scenario. (So I’ve heard. I’m not much of a gym goer myself). With the Sunk Cost Fallacy, it’s more of a you “know” the path you’re on is wrong, and won’t have a good outcome – but you’re trying to avoid wasting the time, or money – or both – invested in the thing.
And trust me, when you know, you know.
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