Sunk Cost Fallacy

A company I’m working with was implementing a major software change. The decision to do so was made several executives ago. The current executive felt the decision was wrong for the organization, and made the right call to switch.

The company had invested heavily in that decision and would lose that money. Others might have stayed with the original decision because of the financial hit.

Fortunately, they didn’t get caught up in the Sunk Cost Fallacy. They made the right going-forward decision. Past money is gone. Whatever decision is made, you can’t get that money back.

Seth Godin on the Sunk Cost Fallacy

As Seth points out in this article, the Sunk Cost Fallacy applies to a lot more than company financial decisions. It applies to much of the decisions we make in our own lives.

We may have invested in a path in our past, but if it is no longer the right path, all the work we did to get to today shouldn’t get much weight.






One response to “Sunk Cost Fallacy”

  1. It’s a brave move, to be sure, and one not many would make. Interesting to thing about how that concept is at work in our own lives.

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