No. 34 · Decisions · Fallacy
Sunk Cost Fallacy
What you have already spent is gone, so it should not decide what you do next.
In the Almanac
“Concorde”, 1962–1976 · “Airbus A380”, 2007–2021
Both stories in full, three ways to use it and where it misleads.
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Questions
What is Sunk Cost Fallacy?
The Sunk Cost Fallacy is sticking with a project because of the money, time or effort already spent, even when the future looks poor. Britain and France kept funding Concorde as costs soared, and Airbus built the A380 for years as orders dwindled.
How do you avoid Sunk Cost Fallacy?
Judge each decision as if starting fresh: is the next hour or dollar worth spending? Persistence can be wise, but stay because of what is ahead, not because of what is behind.
When does Sunk Cost Fallacy matter?
Sunk Cost Fallacy is one of the 35 mental models for decisions, the situations where you ask: Which way should I go? Within that, it belongs to “Committing, and when not to”, alongside Burn the Boats, Circle of Competence and Devil’s Advocate Position.
What is an example of Sunk Cost Fallacy?
Two stories show it at work: Concorde (1962–1976) and Airbus A380 (2007–2021). Both are told in full in The Mental Models Daily Almanac, which has two stories for each of its 365 models.
Which mental models are related to Sunk Cost Fallacy?
Loss Aversion, Commitment and Consistency Bias and Opportunity Costs. Sunk Cost Fallacy itself comes from fallacy.