17: Sunk Cost Fallacy - Deepstash
17: Sunk Cost Fallacy

17: Sunk Cost Fallacy

When we continue doing something despite it being a bad decision simply because we've invested resources into it, it's called the sunk cost fallacy.

Examples:

  1. staying for a terrible movie because you've already paid for the ticket or
  2. staying in an unhealthy relationship because of the time and energy invested.

To make rational decisions, focus on the current situation rather than past investments. Especially important for investors in the stock market.

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yuyutsu

Content Curator | Absurdist | Amateur Gamer | Failed musician | Successful pessimist | Pianist |

Part II (and the final part) of the series. Read and stash away!

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The sunk cost fallacy

The sunk cost fallacy

Humans are especially susceptible to the “sunk cost fallacy”—a psychological effect where we feel compelled to continue doing something just because we’ve already put time and effort into it.

But the reality is that no matter what you spend your time doing, you can never get that time ba...

11. Sunk Cost Fallacy:

11. Sunk Cost Fallacy:

People continue to invest in a decision or project based on the resources already committed, even when it's clear that further investment won't lead to better outcomes. For instance, you might keep pouring money into a failing business because you've already invested a significant amount.

The Sunk Cost Fallacy

We want to finish what we've started because of previously invested resources, even if it is better to quit and use our limited resources elsewhere for better returns.

What you can do about it:

  • Every decision has two costs...

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