Sunk Cost
So what is sunk cost, really?
A sunk cost is money that’s already been spent and can’t be recovered, no matter what you do next. The key is that it’s gone. It’s done.
It should have zero impact on your future decisions. But humans are emotional creatures, and we don’t like wasting money. That’s how you get the “sunk cost fallacy” which is when someone keeps spending on a bad decision because they’ve already spent so much.
Smart business owners know how to cut their losses. You don’t base your next move on money that’s already out the door. Sunk costs aren’t a sign of failure. They’re just part of the learning curve. What matters is whether you double down… or move on.
Sunk costs are like bad dates… just because you paid for dinner and a good bottle of wine doesn’t mean you should stay for dessert.
How people actually use it in a sentence...
“After spending $2,000 trying to fix the espresso machine, Ellie finally accepted it was a sunk cost and just bought a new one.”
Did you know...
Casinos thrive on sunk cost thinking. Studies show gamblers are more likely to keep playing (and losing) simply because they've already spent money.
The more you lose, the harder it is to walk away. That’s not luck, that’s psychology.
Want the textbook definition? Check out Sunk Cost on Investopedia.com