{"id":24363,"date":"2021-01-23T09:27:11","date_gmt":"2021-01-23T13:27:11","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=24363"},"modified":"2021-01-24T22:42:56","modified_gmt":"2021-01-25T02:42:56","slug":"sunk-cost-bias","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/sunk-cost-bias\/","title":{"rendered":"Sunk Cost Bias: Know When to Cut Your Losses"},"content":{"rendered":"\n<p>What is the <a href=\"https:\/\/www.shortform.com\/blog\/how-to-avoid-the-sunk-cost-fallacy\/\">sunk cost<\/a> bias or the <a href=\"https:\/\/www.shortform.com\/blog\/sunk-cost-fallacy-example\/\">sunk cost fallacy<\/a>? How does it affect <a href=\"https:\/\/www.shortform.com\/blog\/methods-of-decision-making-crucial-conversations\/\">decision-making<\/a>?<\/p>\n\n\n\n<p>The <em>sunk cost bias or fallacy<\/em>\u00a0is a term that describes when someone keeps following through on an endeavor to justify previously invested resources. This\u00a0tendency, which is related to loss aversion and status quo\u00a0biases, is often the result of ongoing commitment and zeal towards a project.<\/p>\n\n\n\n<p>Keep reading for more about the sunk cost bias.<\/p>\n\n\n\n<!--more-->\n\n\n\n<h2 class=\"wp-block-heading\">What Is the Sunk Cost Bias?<\/h2>\n\n\n\n<p>In psychology, sunk cost bias or fallacy is a general tendency to follow through on an endeavor after we&#8217;ve already invested considerable energy and resources into it, even when the sunk costs outweigh the potential benefits.<\/p>\n\n\n\n<p>We tend to fall into the trap of the sunk cost bias after we start seeing our work as an extension of our identity. When <a href=\"https:\/\/www.shortform.com\/blog\/your-ego\/\">your ego<\/a> interprets threats to your <em>career<\/em> as threats to your <em>person<\/em>\u2014to your status, to your reputation, to your value in the eyes of others\u2014it wants to fight this failure at all costs. It wants you to bet everything on an outlandish scheme or break the rules in a last-ditch attempt to fix your failures\u2014even though these methods are very likely what got you into trouble in the first place and will probably only increase your difficulties.<\/p>\n\n\n\n<p>Sometimes the wiser decision is to cut your losses and move on to the next project. Everyone makes mistakes\u2014for example, people misjudge market demand, expand businesses too quickly, invest in bad stocks, or aim for unrealistic goals. Then, their businesses fail, their stock portfolios dive, or they spend years chasing a too-lofty target they\u2019re not cut out for (for example, aiming to be a rock star with middling musical ability). To move past your losses so that they don\u2019t define you for the rest of your career, you must control your ego, admit you messed up, and stop trying to fix these blunders. When faced with failure, determine honestly whether or not your errors are redeemable and ask yourself: Should I keep fighting for this? Or should I let this go? If I do, can I emerge from this with my dignity intact, so that I can fight for something else another day?&nbsp;&nbsp;<\/p>\n\n\n\n<p>There are countless examples of people who have navigated this choice\u2014whether or not to cut their losses\u2014both successfully and unsuccessfully.<\/p>\n\n\n\n<p>Successful examples are politicians who\u2019ve lost elections but later win, actors whose movies bombed but who maintained their careers, and entrepreneurs who abandoned failing start-ups and went on to establish thriving ones.&nbsp;<\/p>\n\n\n\n<p>An unsuccessful example of the sunk cost bias is John DeLorean, who refused to admit that he was running his car company into the ground through a mixture of overgrown ambition, mismanagement, and narcissism. Instead of acknowledging his errors and changing his ways, he doubled down on his unorthodox methods, culminating in his arrest for a $60 million cocaine deal he orchestrated in a last-ditch attempt to fund his company\u2019s debts.&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>What is the sunk cost bias or the sunk cost fallacy? How does it affect decision-making? The sunk cost bias or fallacy\u00a0is a term that describes when someone keeps following through on an endeavor to justify previously invested resources. This\u00a0tendency, which is related to loss aversion and status quo\u00a0biases, is often the result of ongoing commitment and zeal towards a project. Keep reading for more about the sunk cost bias.<\/p>\n","protected":false},"author":7,"featured_media":24450,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[81,9,43],"tags":[191],"class_list":["post-24363","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economics","category-psychology","category-self-improvement","tag-ego-is-the-enemy","","tg-column-two"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v24.3 (Yoast SEO v24.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Sunk Cost Bias: Know When to Cut Your Losses - Shortform Books<\/title>\n<meta name=\"description\" content=\"The sunk cost bias is a form of denial. 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We deny that something isn&#039;t working and keep following through to try and justify its costs.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.shortform.com\/blog\/sunk-cost-bias\/\" \/>\n<meta property=\"og:site_name\" content=\"Shortform Books\" \/>\n<meta property=\"article:published_time\" content=\"2021-01-23T13:27:11+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2021-01-25T02:42:56+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/s3.amazonaws.com\/wordpress.shortform.com\/blog\/wp-content\/uploads\/2021\/01\/drowning-sea-ocean-help-desperate-water.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1220\" \/>\n\t<meta property=\"og:image:height\" content=\"650\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Darya Sinusoid\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Darya Sinusoid\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.shortform.com\/blog\/sunk-cost-bias\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/sunk-cost-bias\/\"},\"author\":{\"name\":\"Darya Sinusoid\",\"@id\":\"https:\/\/www.shortform.com\/blog\/#\/schema\/person\/0421cce75bc249b11e2517b3a91f9c46\"},\"headline\":\"Sunk Cost Bias: Know When to Cut Your Losses\",\"datePublished\":\"2021-01-23T13:27:11+00:00\",\"dateModified\":\"2021-01-25T02:42:56+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/sunk-cost-bias\/\"},\"wordCount\":516,\"commentCount\":1,\"publisher\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/#organization\"},\"image\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/sunk-cost-bias\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.shortform.com\/blog\/wp-content\/uploads\/2021\/01\/drowning-sea-ocean-help-desperate-water.jpg\",\"keywords\":[\"Ego is the Enemy\"],\"articleSection\":[\"Economics\",\"Psychology\",\"Self-Improvement\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.shortform.com\/blog\/sunk-cost-bias\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.shortform.com\/blog\/sunk-cost-bias\/\",\"url\":\"https:\/\/www.shortform.com\/blog\/sunk-cost-bias\/\",\"name\":\"Sunk Cost Bias: Know When to Cut Your Losses - Shortform Books\",\"isPartOf\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/sunk-cost-bias\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/sunk-cost-bias\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.shortform.com\/blog\/wp-content\/uploads\/2021\/01\/drowning-sea-ocean-help-desperate-water.jpg\",\"datePublished\":\"2021-01-23T13:27:11+00:00\",\"dateModified\":\"2021-01-25T02:42:56+00:00\",\"description\":\"The sunk cost bias is a form of denial. 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