INSIGHTS
Ideas worth thinking about
ECONOMICS OF EVERYDAY LIFE
What economics can teach us about the choices we make, the value we assign, and the lives we build.
Sunk Cost: Just Because You’ve Invested Doesn’t Mean You Have to Stay
“But I’ve already put so much into it.”
I’ve said it.
You’ve probably said it.
We’ve all said it.
I’ve spent too much money to stop now.
I’ve worked too hard to walk away.
I’ve invested too many years.
I’ve already come this far.
I’ve already told everyone about it.
I’ve built my identity around it.
Surely I can’t just give up.
Economics has a name for this trap:
sunk cost.
A sunk cost is a cost that has already been incurred and cannot be recovered.
The money is spent.
The time is gone.
The opportunity has passed.
Whatever happened, happened.
And because we cannot recover it, that past cost should not determine whether we continue with something.
In economic decision-making, what matters is the future costs and benefits.
Which sounds perfectly rational.
And then humans enter the room.
We don’t like admitting that we’ve wasted something.
If we have spent RM10,000 on something, we want it to have been worth RM10,000.
If we have spent five years building something, we want those five years to mean something.
If we’ve invested our reputation, effort and emotional energy into a decision, walking away can feel like admitting that we were wrong.
So we keep going.
Not because the future looks promising.
But because stopping would make the past feel painful.
And that is where sunk cost becomes particularly interesting.
We start trying to justify what we’ve already spent instead of evaluating what comes next.
Consider the dinner you don’t want to eat.
You’ve paid for an expensive meal.
Halfway through, you realise you don’t like it.
Do you stop eating?
Or do you think:
I’ve paid for it. I might as well finish it.
Of course, finishing the meal won’t bring your money back.
The money is already gone.
All you are doing now is deciding whether to spend another resource—your appetite, your enjoyment, perhaps even your evening—on something you no longer want.
The dinner is a trivial example.
But the same thinking appears in much bigger decisions.
A business that is no longer viable.
A career that no longer fits.
A project that has lost its purpose.
A relationship that has become unhealthy.
A qualification you’re pursuing because you’ve already completed three years.
A strategy that isn’t working but has consumed months of effort.
Sometimes we continue because continuing is genuinely the best option.
And sometimes we continue because stopping feels like admitting defeat.
Those are very different things.
The emotional cost of walking away
This is where I think the textbook explanation of sunk cost doesn’t quite capture the human experience.
Because we don’t only invest money.
We invest identity.
We tell ourselves stories about why we chose something.
This is my career.
This is my business.
I built this.
I don’t give up.
I’ve always been the person who sees things through.
And suddenly, changing direction isn’t just changing a decision.
It feels like changing who we are.
Our ego gets involved.
Our pride gets involved.
Sometimes our fear gets involved too.
And then we find ourselves defending a decision that we might not make if we were looking at it for the first time today.
That’s a dangerous place to be.
The question is not: “Was it worth it?”
At least, not always.
Sometimes we spend an enormous amount of time, money or energy on something that ultimately doesn’t work.
And we desperately want to know:
Was it all wasted?
But perhaps that’s the wrong question.
The better question is:
“Given what I know now, what is the best decision from this point forward?”
The past cannot be changed.
But the future hasn’t been spent yet.
And that distinction matters.
You may not be able to recover the money.
But you can stop losing more.
You may not be able to recover the years.
But you can decide how you spend the years ahead.
You may not be able to undo the mistake.
But you can stop turning one mistake into a much larger one simply because you are embarrassed to admit it happened.
Walking away doesn’t necessarily make the investment meaningless.
This is the part I think we often miss.
Leaving something does not automatically mean the time was wasted.
Perhaps you learned something.
Perhaps you became better at something.
Perhaps you discovered what you don’t want.
Perhaps you met people you would never have met otherwise.
Perhaps the experience changed you.
Perhaps it simply taught you that this particular path is not yours anymore.
The investment may have produced value that isn’t the outcome you originally expected.
And sometimes the wisest thing we can do with an investment that isn’t working is to stop investing in it.
Not because the past doesn’t matter.
But because the future matters too.
There is a fine line between perseverance and stubbornness.
We rightly admire people who don’t give up.
Resilience matters.
Commitment matters.
Perseverance matters.
But persistence isn’t automatically a virtue.
Sometimes staying the course is courage.
Sometimes changing course is courage.
The difference is whether we are responding to evidence about the future or defending our investment in the past.
That distinction is worth paying attention to.
Because there is nothing particularly noble about continuing to throw good money, good time or good energy after something simply because we’ve already thrown so much at it.
So, the next time you hear yourself say…
“But I’ve already invested so much…”
Pause. Then ask:
“If I hadn’t already invested anything, would I choose this today?”
If the answer is yes, carry on.
If the answer is no, you may have just discovered your sunk cost.
And if you decide to walk away, you don’t have to call the past a failure.
You can simply say:
“That was the price of learning.”
Then stop paying.
– Insights by Norra Ismail
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