Sunk Cost Fallacy And Why Some Hang On

Why do some people hang on to supporting a relationship, a leader, a job, a friendship when it obviously is not in their best interests or the best interests of the collective?  Cassandra Phillips explains, “ Psychologists attribute the tendency to hold on to failing relationships to a phenomenon called sunk cost fallacy.  This occurs when individuals [and organizations, political parties, families, cultures] continue investing time, energy, [financial resources, voting patterns] and emotions  into something simply because they’ve already invested so much.  Research from Stanford University found that people often resist letting go due to fear of failure or rejection.  Yet, letting go is essential for personal growth [and for better decision-making in the prefrontal cortex]” (The Art of Letting Them 33).  What are some examples of the sunk cost fallacy?

Have you ever started reading a book for pleasure, not for an academic course, and 30 pages into the 562 page book you are bored by it?  Do you stop reading it or do you just plow through it?  If you answered that you would stick with that book no matter how much joy it sucks from your life, then you are activating the sunk cost fallacy.  I used to stick with a book no matter how awful it was until I started reading Herman Melville’s Moby Dick, the most soul-sucking book I’ve attempted. Now, if a book doesn’t grab my interest in 100 pages, I close it and give it away.  I’m not going to waste my time on it. Or, have you gotten about 30 minutes into a movie and found it wasn’t to your liking, but, you made yourself stick it out until the end?  That was me watching The Matrix.  Please don’t come at me about that!  It was not enjoyable to me and I truly suffered through it.  I was a victim of sunk cost fallacy.  Or, have you been in a relationship that was not getting any better after having gone through counseling and trying your best to repair it but refused to give up on it?  That’s likely a sunk cost fallacy decision. Or, have you been in a job that was unsatisfying, but won’t look for something else because you know that job so well, invested so much into it?  Sunk cost fallacy.

Another definition of the sunk cost fallacy comes from Kassiani Nikolopoulou: “… is the tendency for people to continue something because they’ve already invested their time, energy, or more, even when abandoning it would be more beneficial” (qtd. in https://www.scribbr.com/fallacies/sunk-cost-fallacy/). The author discusses why it’s a problem to be in the sunk cost fallacy realm: “[It] leads people to believe that past investments (i.e., sunk costs) justify further investments and commitments.  They believe this because the resources already invested will be lost.  In rational decision-making, sunk costs should not play a role in our future actions because we can never get back the money, time, or energy we have invested - regardless of the outcome,  Instead of considering the present and future costs and benefits, we remain fixated on our past investments and let them guide our decisions. This is a fallacy or flawed reasoning…that creates a vicious circle of poor investments, also known as ‘throwing good money after bad’” (https://www.scribbr.com/fallacies/sunk-cost-fallacy/).

Dr. Jeremy Sutton, in his article, “Sunk Cost Fallacy: Why We Can’t Let Go” shares warnings “…[that it] often leads to poor decision-making, as it prioritizes past investments over better future options” (https://positivepsychology.com/sunk-cost-fallacy/). Dr. Sutton continues by quoting from a 2020 piece of research, “This cognitive bias is commonplace. Psychology recognizes that to avoid being overwhelmed and successfully negotiate our environment, we must make powerful — often immediate — decisions. However, there is a problem: Such decisions are often wrong.  Humans routinely use rules of thumb to navigate their environment and interact with the objects and people they encounter. Psychologists suggest that these heuristics ‘serve as shortcuts, especially when decisions must be made in uncertain situations.’ While heuristics [discovery or problem-solving techniques] simplify complex tasks involving assessing probabilities and predicting outcomes, saving cognitive load, they have a cost. Such predictions are often wrong. The sunk cost fallacy is one such example, and it happens all the time. Sunk costs have already been incurred and cannot be recovered or changed. We are unable to retrieve or alter what we have spent (time, money, emotional energy, etc.), yet we are still willing to increase our investment.

These costs can take various forms, be they personal or related to work:

* Time spent, some of which we could have invested elsewhere

* Effort and energy, particularly on more challenging tasks

* Mental strain, including any associated anxiety, stress, and worry

* Resources, such as facilities, materials, and equipment

* Financial investments potentially involving purchasing new technology or premises, etc.

* Nonrefundable costs, including legal fees, advertising, etc.

Research recognizes each one as a potential element in the sunk cost fallacy. As sunk costs grow, so does our commitment to the sunk cost fallacy” (qtd. in https://positivepsychology.com/sunk-cost-fallacy/).

Why, then, do we cling or increase our dedication to sunk costs?  According to several research studies, “Psychology theory and research offer the following rationale and processes behind the sunk cost fallacy:

* Loss aversionAs our sunk costs increase, so does the potential loss associated with the task, idea, project, or commitment. We remain committed to possible gains and fearful of the real risk of losing an investment, particularly a large one.

* Justification and rationalizationAs the sunk costs increase, we are less able to admit our mistakes or poor decisions. By committing more to the fallacy, we continue to justify our initial and ongoing investment, even when it is not rational to do so.

* Social pressure and reputation [maintaining the status quo]Context plays a vital role in the fallacy. If our reputation is at stake, we may feel pressure from others to continue our investment. The fear of being seen as a failure can contribute to an even stronger commitment to the sunk cost.

* Cognitive dissonanceHolding conflicting beliefs or values is uncomfortable. We may continue with our investment rather than abandon it to manage or remove the discomfort.

* Emotional attachmentAs a task, project, or commitment continues, we grow more emotionally attached, making it more challenging to let go.

* Over-optimismAn overly optimistic belief that the investment will pay off or that the decision was the right one can also play a part in the continuing fallacy.

Ultimately, the ongoing sunk cost fallacy is driven by our desire to feel that an initial investment or decision was not wasted. We fear the regret associated with recognizing we’ve made a mistake” (qtd. in https://positivepsychology.com/sunk-cost-fallacy/)

Why do some people continue to cling to, for example, a leader who is failing?  Perhaps it’s loyalty for the past support they gave to that leader and they cannot admit to themselves and others that they could have invested poorly in that leader.  Or, maybe that leader united them through a central identity, through a community and they feel they will lose who they are if they no longer support that leader.  Possibly, they hope their past support will justify their continued backing of the leader even though current situations have shown the leader as not worthy of support.  This explains why people who do not cling to the leader do not relate to those who staunchly do.  They see the sunk cost fallacy and want nothing to do with it.  Of course, the psychology is more complex, but, this attempts to explain why some people cling to a leader no matter what the leader does or says.

What are examples of sunk cost fallacy you have witnessed or have fallen into in the past? I invite you to share your stories, thoughts, insights, and suggestions by either commenting below this post if you are reading this on social media, or, if you are reading this through your email subscription, please share, by emailing me, at reimaginelife22@gmail.com.

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