Why it's a trap
There's always one right question: what will be more worthwhile from this minute onward? Money and time spent yesterday are already gone whatever you decide, so they don't distinguish one option from another and shouldn't factor into the decision.
In practice, the opposite happens. The more you've invested, the harder it is to walk away, and the decision is based not on future benefits but on past spending. Hence the phrase that explains it all: "It feels wrong to quit after doing so much already."
Don't ask yourself "how much have I already invested?" Ask "would I start this from scratch today, knowing what I know now?"
Where the persistence comes from
The first reason is an unwillingness to acknowledge a loss. As long as the project continues, the loss is sort of not there: it becomes final when you walk away. Continuing postpones the unpleasant acknowledgment, and people pay for that delay with new investments.
The second is consistency. We don't like to look like we're wavering, especially in front of others. Giving up on something we've started looks like admitting a mistake, while continuing looks like staying true to a decision, even though it's really just repeating it.
The third reason is practical: the longer something goes on, the more obligations, agreements, and other people's expectations become built into it. Leaving becomes more costly not because you're sorry about what you've invested, but because genuine new costs have appeared.
What it looks like on a large scale
A classic example is a supersonic passenger aircraft that continued to be developed after its economic pointlessness had become obvious. The decision to continue was explained by the money already invested, and the phenomenon was even named after it.
- Ask yourself: would I start this today, knowing what I know now?
- Count only future costs and future benefits. The past is the same whatever you choose.
- Say the real reason for continuing out loud: benefits or an unwillingness to acknowledge a loss.
- Agree on an exit point in advance, before you've invested. Later, you'll always want to move it.
The last point works better than the others because the decision is made in a calm state. An exit condition named in advance turns a difficult choice into following through on an agreement with yourself.
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Sources
- The tendency to take sunk costs into account is described in behavioral economics
- the example of continuing a demonstrably unprofitable aviation project became associated with a name of its own