The sunk cost fallacy loop

A sunk cost is a cost that has already been incurred and cannot be recovered. 

We fall into the sunk-cost fallacy when we choose to do or continue to do something only because we have already invested some sort of resources in it.

This could be money, time, effort, and even emotions!

The sunk-cost fallacy leads us to irrational choices as it narrows our focus and makes us overlook other potentially relevant decision-making factors. 

You might find the following situations familiar:

• Sticking with outdated technology because of the past investment in learning and setup. 
• over-developing a feature that doesn't add customer value because of the initial investment in developing it.
• avoiding necessary strategic pivots because of the resources already spent on the current path.

But here's the thing:  sunk costs are gone, and there's nothing we can do to get them back. So, instead of dwelling on what we've already spent, we should focus on what we can do moving forward.

Here are a few tips to fight the sunk cost fallacy and behave like a “rational agent”?

1. List all the critical factors that should influence your decision. This simple practice will help you broaden your focus.
2. Focus on all possible future outcomes of your current decisions instead of getting stuck on past mistakes.
3. Reason in a counterfactual way. Ask yourself, "Would I still be doing this if I hadn't invested anything in it?"