We view ourselves as rational decision-makers, and that's our first mistake. Our second mistake is that after making a mistake we continue on the same path because we refuse to accept that we were wrong, not to mention all of the time and energy we have put into a relationship, a job, or a career choice.
In the video below, Julia Galef, president of the Center For Applied Rationality, explains why you might stick it out at a job even though you know you would probably be happier somewhere else. "You figure I’ll just stick with it because I don’t want my past ten years of effort and time and money to have been wasted," Galef says.
So what to do about it?
Awareness of the sunk cost fallacy is key, and you will start to notice how it works when it comes to decisions about small things. Let's say you're 100 pages into a book and it's a big disappointment. Do you put it down or do you "trudge through the remaining 200-300 pages?" Galef asks.
Understanding how the sunk fallacy works in that instance might help you to think through more important decisions, such as whether to change your career or drop out of a Ph.D program.
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