ELI5: What is the sunk cost fallacy?

Context: Psychology 7 views Apr 1, 2026 2 min read

The sunk cost fallacy is when you keep doing something, even if it's bad for you, because you've already put a lot of time, money, or effort into it.

Imagine you buy a ticket to a movie, but after 30 minutes, you realize it's really boring. You don't like the story, the acting is bad, and you're just not having fun.

  • If you leave, you "waste" the money you spent on the ticket.
  • If you stay, you waste the money and your time.
The sunk cost fallacy makes you think you should stay because you don't want to "waste" the money. But the money is already spent (a sunk cost)! You can't get it back. So, the best thing to do is leave and do something you enjoy.

Here's another example:

Let's say you're building a sandcastle. You've spent hours on it, but then the tide comes in and starts washing it away.

  • Continuing to try and rebuild the sandcastle as the tide comes in is a bad idea.
  • Even though you have invested a lot of time, it's better to stop and do something else, like build a different kind of sand structure further away from the water.
The sunk cost fallacy tricks you into thinking about what you've already lost instead of what's best for you now. It's a common trap in psychology where past investments cloud your judgment. You should always focus on the future and make choices that will make you happy, even if it means admitting you made a mistake in the past.

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