I would 100% win a bet with you if I guessed you have at some point stayed in a relationship or a job longer than you should.
The sunk cost effect (also called the sunk cost fallacy) is our natural tendency to continue investing in something that no longer serves us or isn’t working. We are loss-resistant beings (generally 2.5 times more reactive to loss than gain) and will often turn ourselves inside out to avoid failure.
The truth is that people continue investing time, money or efforts trying to fix something that isn’t working. The smart thing to do is cut your losses and move on. But the perception is, “I’ve put so much into this; I don’t want to give up.”
The sunk cost is particularly evident in long-term relationships.
No matter your success or money, giving love and being loved by others makes you feel alive and connected. However, love cannot prop up an ailing relationship, no matter how much you want it. People often stay in relationships loooooong past the sell by date because of the significant time & effort invested.
In my experience, what helps keep a relationship afloat is that you grow together, evolving as human beings. It was what I especially loved about David. He walked the journey with me as a self-actualising being, and kept pace with my desire to be better, learn more, do more and be more.
We are not rational decision-makers. Neuroscience and behavioural economics have disproved that. Indeed, our emotions influence our emotions.
The sunk cost effect often parallels commitment bias, where, despite indisputable evidence to quit, we continue to support our past decisions like a mamma bear guarding her cub.
The more you have put into something, the more resistant you are to walk away. Indeed, we continue making decisions based on the past instead of considering the future consequences of continuing.
How Does the Sunk Cost Effect Impact Your Business?
Have you stuck at some business practices for way too long withour results? Do you find yourself in a quandry about giving up some aspects of business or firing a long-term client that sucks the life out of you, pays late or dismisses your work? If so, you’re a victim of the sunk cost effect. However, letting go of anything that doesn’t serve you, frees up space for something better. The universe abhors a vaccuum and will attempt to fill is as soon as possible.
My Sunk Cost Experience
Every long relationship I had, except one, I should have given up after six months. I once spent eight years with a guy and was miserable for seven of those years. It seems crazy looking back, but I had put a lot into the relationship and lived in hope it would become good again. Thank goodness I now understand the sunk cost fallacy.
I spent over two years working on an affiliate website. When I started, the subject interested me, but life experiences changed my needs and desires and I no longer had the passion about the subject. Over time, writing the content became challenging because I was bored with the subject. My best friend wanted me to continue as she believed in the site, but it was in a highly competitive industry and would likely take a few more years and a lot of content before it succeeded.
For a while, I realised I continued going to please my friend. I didn’t want to give up because as a person sub-threshold ADHD, I had a habit of losing interest in most things I tried. However, the relief when I closed the site was incredible and it freed up my mind space to focus on projects I was more invested in emotionally.
I am a Coach and Copywriter helping heart-led small businesses become visible for business growth.