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Choiceology · June 3, 2024 · 30m
Good Money After Bad: The Sunk Cost Trap in Everyday Life
Why people keep investing time, money, or effort into something even when future benefits no longer justify continuing. Explores the sunk cost fallacy through stories of escalating commitment in business, relationships, and personal projects.
Highlights
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Escalation of commitment — sunk costs create psychological momentum that overrides rational analysis
Milkman: the more you've invested in a failing course of action, the harder it becomes to walk away. This 'escalation of commitment' explains why governments continue failed policies, companies persist with doomed products, and individuals stay in bad relationships.•
Opportunity cost neglect — focusing on sunk costs blinds us to what else we could be doing with those resources
Milkman: every hour, dollar, or unit of energy spent continuing a failing project is an hour, dollar, or unit of energy NOT spent on a potentially better alternative. Sunk cost thinking blinds people to opportunity costs — the value of the next-best use of their resources.