Sunk cost fallacy
The sunk cost fallacy is the mistake of continuing an endeavour because of past investment rather than future value.
The money is gone and cannot come back, so it should not affect what you do next. Telling yourself that, and acting on it, is surprisingly hard.
The sunk cost fallacy is the mistake of continuing a course of action because of what has already been invested in it, rather than because of its future prospects. Past, unrecoverable costs should be irrelevant to forward-looking decisions, yet they powerfully sway them.
Throwing good money after bad
The fallacy shows up whenever people persist in a losing endeavour to justify what they have already put in. The half-finished project that should be cancelled is continued because so much has been spent. The unpromising venture is given more money to avoid admitting the earlier money was wasted. The dull film is watched to the end because the ticket is paid for. In each case the rational comparison, future benefit against future cost, is overridden by the pull of the past.
Why the past grips us
The grip of sunk costs comes from loss aversion and the wish to avoid admitting a mistake. Abandoning an investment forces you to register the loss and to acknowledge that the earlier commitment was wrong, both of which are painful, so people keep going to postpone the pain, even when continuing makes the eventual loss larger. The fallacy is, at bottom, an attempt to protect the ego and defer regret at the expense of the wallet.
Breaking the grip
The cure is a deliberate reframing: ask what you would choose if you were deciding fresh today, with the sunk cost already gone and unrecoverable. That question strips away the irrelevant history and exposes the real choice between future paths. Organisations build the same discipline into stage-gates and independent reviews, where someone without ownership of the original decision can judge it on its prospects alone.
The sunk cost fallacy is among the most common and expensive errors in business and life precisely because the rational rule, ignore what is already spent, fights against deep instinct. Recognising it is easy; resisting it, in the moment, with money and pride on the line, is the hard part.