Sunk Cost Explained — The reason why you are indecisive

Sunk Cost explained (
Sunk Cost explained (

In the last blog post, I wrote about how the Sunk Cost Fallacy prevents you from starting a new career. If you haven’t read it, read it over here. However, I didn’t explain much what Sunk Cost Fallacy means. You might be interested to learn that sunk cost fallacy has cost us missed opportunities and investments.

Time, money or effort invested is seen as a “cost”. Sunk Cost fallacy occurs when we are required to continue to invest on a project that does not provide a clear future benefit. In this process, we incur more “cost” without gaining benefit from the investment. For example, we stayed on a non-rewarding relationship for too long.

Why are we ‘wasting our time and resources’? Instead of examining the potential benefit before we continue our investments, we rationalise based on the cost that we have incurred. Sunk Cost is a ‘backward looking decision’.

Let’s look at Flappy. This is Flappy.

She wants to build a nest and settle down. She plans to lay her eggs and start a family on the nest.

After flying and searching for a suitable tree, she chose one and started to build a nest. She choose a tall tree with a wide trunk. This tree is stable enough.

Halfway through building the nest, she realised that the tree she chose might not be the safest option. Its too bare. There are no trees nearby to provide cover. A hawk might easily spot her nest and look for any eggs or hatchlings as food. Finding another tree with more shade might be a safer option.

At this moment, she has to make a decision — to abort the nest and look for a safer place or continue on building the nest.

Flappy looks at the half-completed nest. She thinks “I have invested so much in this nest. Its such a waste to give it up”. So, she continued.

When the nest is 75% done, she saw a Hawk was observing far away. At this point, thoughts of searching for a new tree came back. When Flappy looked at the almost-complete nest, she felt the pain of giving up. She thought that giving up right now is going to be painful. This (perceived) pain will be so intense that she can’t handle it. This makes quitting even more difficult.

Now, the nest is complete. Flappy told herself, “I have a decent nest now. Definitely not the best. But this is still acceptable. Im not sure if I can find a better tree out there.”

Flappy lay the eggs. She saw her eggs hatch into little babies. All this while, the hawk was observing. It was hunting for food and found them as an easy prey. When Flappy was out searching for food, the hawk snatch the hatchlings. Flappy came back to an empty nest. She realised that she has lost more than a nest. She lost a home.

Even though this is a sad story, we can learn from Flappy’s plight. From the story, we are able to uncover three unhelpful thoughts that led to Flappy’s eventual loss. The three thoughts are:

  1. It is wasteful to give up on a project. — we do not like to see our efforts go to waste.
  2. The pain of giving up can be overbearing. — we avoid pain.
  3. There might not be a better option. So why give up what I have right now. — the future is uncertain. what if I end up worse off?

We mentioned that sunk coast is a “backward decision-making process”. When we identify the above three thoughts, we can be sure that we are making a sunk cost fallacy. How can we overcome these unhelpful thinkings? Please lookout for the next post.

Originally published at The Mental Falconry.

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