Sunk Cost Fallacy

Definition

The sunk cost fallacy describes the tendency to continue an activity, project, or decision because of previously invested time, money, or effort, even when continuing no longer makes sense.

The concept was first formally described in behavioral economics by Richard Thaler in the 190s and later popularized through the work of Daniel Kahneman and Amos Tversky on cognitive biases and decision-making under uncertainty.

Why it matters

In productivity systems, personal knowledge management, and long-term projects, the sunk cost fallacy quietly drives many poor decisions. It keeps people locked into workflows, tools, goals, or commitments that no longer serve them.

Instead of asking whether something is still useful, attention shifts to what has already been invested. Progress becomes harder not because change is impossible, but because letting go feels like admitting failure.

Underlying mental model

The sunk cost fallacy is rooted in a backward-looking decision frame.

Rather than evaluating choices based on future value, the mind anchors on past investment:

  • time already spent

  • effort already made

  • identity already attached

The model assumes that abandoning a path wastes previous investment, even though those costs cannot be recovered and should not influence future decisions.

Typical example

Someone maintains a complex productivity or PKM system that no longer fits their needs. Instead of simplifying or changing it, they continue using it because of the time spent setting it up or learning it.

The system becomes heavier over time, not because it works well, but because it feels too costly to abandon.

What the sunk cost fallacy is not

The sunk cost fallacy is not:

  • persistence

  • long-term commitment

  • finishing what you started

It becomes a fallacy when past investment overrides clear evidence that a different path would be more effective going forward.

Relationship to productivity systems and PKM

The sunk cost fallacy explains why systems often become rigid and over-engineered.

It prevents people from:

  • removing unnecessary structure

  • changing tools or workflows

  • redefining goals when context shifts

Metacognition and regular reflection are required to counteract it, allowing decisions to be guided by future usefulness rather than past effort.