Delving into the realm of economic theory, we explore the intriguing concept of the sunk cost effect. A phenomenon that influences decision-making processes, it's a captivating subject that intertwines psychology and economics in unexpected ways.

Why do we continue a bankrupt project just because we have already invested a lot of money, time, effort, or feelings in it?

The “sunk cost” trap is extremely common, causing different types of damage, from hours and hours of playing Farmville to aeronautical industry projects or the meaningless continuation of the Vietnam War.

  • Sometimes, the effect is so strong that people are immune to any explanation, mathematical, financial or otherwise.

How to counter sunk cost?

Think that you haven’t invested anything in that project so far, that someone gave it to you. Would you continue it? No? Then close it.

  • Don’t seek the advice of someone who was involved in the initial decision. Ask a new colleague.

Cultivate in the company an atmosphere that lacks fear of failure

Our houses are full of old things, which we no longer need, but which we do not throw away.

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