To my readers:
Hey! Last year I shared “Christmas on Blurry Mountain” and several indicated they would like to see more about Blurry Mountain. I am working on a prequel “The Unsettling” about the family which founded the farm on the mountain. I’ve gotten them from Wales to North Carolina. Am working on getting them to the mountains of Tennessee/North Carolina. Look soon for part one of that story.
(NOTE from Sherry: I am planning to post Part One on Sunday, Jan18, 2026!)
SUNK COST FALLACY
Let’s say you bought a piece of bubble gum for 10 cents, but realized you didn’t like the flavor.
To make up for your loss … 10 cents on a product you couldn’t use and couldn’t re-sell … you bought a cantaloupe for $1.89. When you got it home you remembered that your spouse hates cantaloupe. You couldn’t eat the whole thing either. Loss is 90 cents (plus the 10 cents on the gum) = $1.00.
Next time you’re at the store you subconsciously look for a way to “make up” your “sunk costs” (losses). Are you catching on? Yes, it is exactly like the gambling loop.
There is no way to “make up” these losses. It is better and healthier to realize that, stop the cycle, and move on. Unfortunately, many forge ahead.
Some do it with education. She acquires a bunch of student loans but doesn’t like working in accounting, so she goes back for another degree, only to find she doesn’t like that either. Instead of getting a job and sticking with it for a few years to pay off the loans, she tries a third degree. Fine! But she has just succumbed to the sunk cost fallacy.
Some do it with cars (I knew a person like this). He bought the car of his dreams on credit. Three years later he traded it in and bought a little nicer (and pricier) car. His loan was big since he was paying off 2 cars, but he could afford it. But then, three years later he got a hankering for a $80,000 pickup truck. He still owed most of the cost of the second car. The bank refused to give him the loan and the dealership wouldn’t either. He found a loan company which would at a higher interest rate. So, he ended up with a $120,000 loan for an $80,000 truck. He thought, “Might as well!” He shouldn’t have.
So, let’s have a clear definition. “The sunk cost fallacy is our tendency to follow through with something that we’ve already invested heavily in (be it time, money, effort, or emotional energy), even when giving up is clearly a better idea.”
A number of years ago I hired in at a local pest control company … I researched it and found it to be one of the best in the area. The owner had “his” way of doing things. He also did not want any suggestions. However, being who I am, I worked out several worthwhile and simple improvements. He wasn’t interested. This also was an example of sunk cost fallacy. He was invested emotionally in the program he had developed (and he had the right). But he missed out on easy money as a result. My “improvements” would have taken a couple hours a week, but would have been rewarded with lower costs and more efficiency for years to come. Net result would have been more profit with the same workforce, trucks, and equipment. How much? I conservatively estimated 7%. Some business people would sell their souls for less.
Where does this bias apply?
Living Together. I know of too many adults who are stuck in a worthless relationship. They don’t want to marry the jerk (or jerkess), but they found the relationship not THAT uncomfortable. Sometimes kids are involved (both pets and children). Listen! Relationships are built on trust and met goals. If he or she isn’t the “one” you should know that by 18-24 months. If this isn’t going to result in a mutually agreeable long-term relationship, get out! Move on! You made a bad investment and you can’t “fix” stupid. You wasted time and emotional energy, but don’t make the pain of being in the relationship last longer because you hope something might change. (Hint: If it was going to change it would have already.)
As mentioned, buying an expensive car you really can’t afford. Same deal. First, don’t buy what you can’t afford. But if you do, take the hit and get out as fast as possible. Find any way in the world to sell it and pay off the difference. Then buy a cheaper used car. You CAN’T win, but you can reduce the hurt.
Any bad investment. Let’s say you bought “Garbage In, Garbage Out” stock because it seemed like a great opportunity at the time (your cousin gave you the tip). Let’s say your $1,000 investment lost $500. Should you a) Buy More? b) Hold and Hope? c) Get out NOW! For full disclosure, I’ve done all of these at times over the years. Buying More may work for an excellently managed stock fund. Hold and Hope is usually a fair decision for a well-tracked stock fund. However, for individual stocks … get out NOW. In fact, don’t buy in the first place because individual stocks are very risky.
You have a pet rabbit you were hoping to breed. It died (sad, I know). In fact it is the third rabbit you’ve attempted to breed (all failures). Should you invest in one more? Think about this. You’ve lost $40 per rabbit plus a hutch, a fenced area, and rabbit food. You’ve invested quite a bit. What is the plan? First, more rabbits are a bad idea unless you figure out why the first three died. Second, you are in the hole and you may have to accept that you made a bad investment of money and time.
Reading, too. I started several books I was not enjoying. One used so much jargon (Sci Fi) that I had trouble following the plot. Did I read the entire book anyway? NOPE! In another I was enjoying following the humorous relationship between the main character and his co-pilot. For no discernible reason the author killed off the important second character in chapter three. I tried reading a few more chapters, but realized the fun was gone. It went back to the library.
The most obvious, gambling. One more! Maybe I’ll win it back! (Hint: Being struck by lightning is more likely.)
Losses are difficult to recover. When you lose, sit and ponder, “Would it be better to accept the loss and move on?” Remember: When what has been done cannot be undone, Past Costs should not lock you into a Future Decision.
Copyright 2026 Donald Whelpley
[PLEASE NOTE that Don is always open to discussing the thoughts and opinions he shares here and welcomes comments as shared in the comment section. He doesn’t use other social media platforms and won’t see whatever you’d like to share with him if you post it elsewhere.
ALSO, Don is always open to offer his thoughts on various topics. If you have a specific request, you can let him know in a comment; he reads – and replies to – them all. ~ Sherry]
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