Let Go of Sunk Costs

DOES THIS SOUND FAMILIAR?



You purchased a coat a couple of years ago—you paid good money for it—then brought it home, tried it on, felt it wasn’t right for that day, put it in the closet, took it out every few weeks, and put it back in. You’ve worn it once or twice, if at all. Your partner says, “Why don’t you throw that coat away? You never wear it.” But you say, “I can’t. I paid good money for it.” In fact, if you didn’t own the coat, you would never go out and buy it now—because you know it’s not right for you. But because you own it, you can’t get rid of it. It’s a “sunk cost.” You’ve sunk time, money, energy, and reputation into something and you feel you cannot walk away from it. You can’t throw it out, leave it behind, or give it away.

Think about your life right now. Begin with your possessions. Are there things that you have been keeping—maybe even hoarding—that you can’t seem to throw out because you paid money for them or simply because you have them? Do you feel stuck in a relationship that you know is self-defeating, but unable to break it off because you’ve invested so much of yourself in it? Or you are stuck in a job that’s wrong for you, but afraid that making a change means “throwing it all away”?
The irony of a sunk cost is that the more we put into it—the more it costs us—the harder it is to abandon it. Staying with a sunk cost can also make us more depressed—more helpless, less confident, and more regretful. For example, people often stay in abusive relationships for a long time because the relationships have made them feel helpless and inferior—the very traits that keep them from asserting themselves. Sunk costs can become self-fulfilling prophecies.

Sunk costs are everywhere. We have sunk costs in relationships we cannot leave, jobs we no longer find rewarding, houses we can’t afford to sell for less than top dollar, clothes that fill up our closets and attics, and junk that we collect. When we say, “I can’t throw that out because I paid good money for it,” we are honoring a sunk cost. We are making a decision looking backward at what we paid for it, rather than looking forward to how useful it will be.

But good decisions are about looking forward, not backward. Good decisions are based on future utility—that is, what you will get out of them in the long run—and aimed at moving you toward your future goals. They’re about the future, not about the past. Sunk costs are almost always about rescuing past mistakes and trying to make them work out. Sunk costs are about throwing good money after bad.

You can break free from sunk costs by asking yourself, “What decision would I make if I had to go back to the beginning—before I made the decision to get into this?” For example, if you never bought the coat or never got into the no-win relationship, would you do it again? If the answer is no, then why hold on to it now? You can also ask yourself, “What advice would I give a friend?” If the answer is, “Get out,” then give that advice to yourself. The only reason you are staying in is to try to prove that a bad decision will turn out to be a good decision. And you can recognize that giving up a sunk cost doesn’t mean it was a total waste of time. You may have gotten some use out of it—some pleasure.

The problem is that the costs now outweigh the benefits. Giving up on a sunk cost will allow you to focus on goals and behavior within your control—new relationships, activities, and interests—that you can start pursuing almost immediately. You cannot control the past decisions that led to a sunk cost. But you can control what you do now—and in the future. Giving up on a sunk cost opens new doors.