In economics, there’s a concept known as the sunk cost fallacy. The sunk cost fallacy occurs when someone makes a decision based on their previously invested time or resources.
The classic example occurs when you buy something that you end up not needing or enjoying, but you force yourself to use it anyway because you don’t want the money to go to waste.
You’re actually making yourself less happy than if you simply discarded it because you want to justify the money you spent.
Another example is when a company spends a ton of money on an ad campaign that bombs. But rather than discontinuing the campaign, they need to feel like they got some return for all of the time and money invested, so they continue to run it even though it loses money.
The sunk cost fallacy is also illustrated in the saying, “throwing good money after bad.”
People don’t want to quit the job that underpays them because they don’t want to feel as though they wasted the last five years of their life.
Businesses don’t cut wasteful spending because management doesn’t want to admit they were wrong about something.
Governments don’t surrender when losing a war because they don’t want people to feel as though their soldiers died for nothing.
