The Sunk Cost Fallacy

It turns up every day

The cinema is the classic example, but the same pull shows up at lunch, in a queue, in your bank statement and in the garage, and each time the fix is the same, which is to cross out what has already gone and look at what is still in front of you.

Why your brain does it

None of this means people are foolish, because the pull comes from habits that usually serve us well, and it helps to know which of them is talking when you feel you cannot walk away.

Mice do it too

In 2018 a team at the University of Minnesota published a study in Science that gave mice, rats and people the same kind of task, where each of them waited for a reward, food pellets for the animals and short videos for the humans, and could give up at any point and try somewhere else.

All three species were more likely to keep waiting once they had already put time in, and the longer they had waited the stronger the pull became, which suggests this is something very old in how animals value effort rather than a quirk of people who have read too few economics books.

How a small loss grows into a big one

A bad film costs you one evening, but the same habit gets far more expensive when it repeats, because every new payment made to rescue the old ones becomes one more thing you cannot bear to waste, and in 1976 the psychologist Barry Staw gave the spiral a name, escalation of commitment, in a paper he called "Knee-deep in the big muddy".

The most famous example flew at twice the speed of sound

Concorde is one of the most loved machines ever built, and it is also the reason biologists have a second name for this habit, because the plane itself was a marvel and the trouble lay in the reasons two governments gave for paying to keep it going.

Development costs are for Britain and France combined, at the prices of the day, so they are not adjusted for inflation, which the same source puts at about a third of the rise; the 1962 bar is the middle of the £150 to £170 million range. Sources: Thayer Watkins, San José State University; Duxford Aviation Society; The National Archives.

In 1976 the biologists Richard Dawkins and Tamsin Carlisle wrote a paper in Nature about why animal parents do not abandon young they have already invested in, and they called the mistaken version of that reasoning the Concorde fallacy, which is why the name still turns up in biology textbooks today.

What happened when psychologists tested it

In 1985 Hal Arkes and Catherine Blumer of Ohio University ran a set of experiments that are still the standard reference on this, and the first was a single question they gave to college students in Ohio and Oregon, which you can answer yourself before you see what the students said.

The second experiment used real money at the box office of the Ohio University Theater for its 1982 to 1983 season, where the first sixty people who came to buy a season ticket were sold one at random at the full $15, at $13 or at $8, and the researchers collected the colour-coded stubs after every play to count who came.

The second half of that chart is the hopeful part, because it shows the pull of what you paid is strongest while the payment still feels fresh and fades as it slips into the past.

When the past does count

Not every "I have come this far" is a mistake, and the test for telling them apart is simple, because the past matters only when it changes what the road ahead looks like, by making it shorter, cheaper or better.

• You are nearly finishedWith nine of ten modules done, the last one costs little and gets you the whole certificate, so finishing is the right call, as long as you are weighing the last module and not the nine behind you.
• What you built is still usefulSix years of nursing make the next year of nursing easier for you than for anyone starting today, and that head start is a real reason to stay in the field even though the six years themselves are spent.
• Stopping has its own priceCancellation fees, a broken promise or a lost reference are costs you would pay in the future, so they belong in the comparison along with everything else that lies ahead.

Can you spot it?

Here are five things people say, and for each one the question is whether the past is doing the talking or whether there is a real reason about the future underneath it, so pick an answer and the explanation will open.

The fresh-start question

Most people who study this end up recommending some version of the same question, because it removes the past from the room and leaves only what is still yours to decide.

If I were starting fresh today, knowing everything I know now, would I choose this?

If you would not buy a ticket to the second half of this film, you can leave with a clear conscience, and if you would not sign up for this gym, this course or this repair today, that answer is worth listening to before the next payment goes out.

Try it on something of your own

Everything on this page works the same way on a real decision, so here is the bill from the cinema made blank, where you can write in the thing you are unsure about, put what you have already spent in its own box where it can do no harm, and score the two roads ahead.

The people who let a coin decide

The most hopeful evidence comes from the economist Steven Levitt, who invited people stuck on a big decision, such as whether to quit a job, end a relationship or go back to school, to flip a coin online and let it decide.

People whose coin came up "make the change" were more likely to actually make it, and six months later they reported being happier than the people whose coin told them to stay as they were, which suggests that most of us hold on a little longer than is good for us, and that letting go tends to turn out better than we fear.

The money is already gone, and your next decision only gets to spend what you have left, which is usually more than enough to do something better with.