Skip to main content
Also known as: sunk cost bias, throwing good money after bad

Sunk Cost Fallacy

FoundationalFrameworksFinance

Definition

Sunk Cost Fallacy: The sunk cost fallacy is the tendency to continue investing in something because of previously invested resources (time, money, effort) rather than future value. Rational decisions should ignore sunk costs and evaluate only future costs and benefits. Startups often fall into this trap with failing products or strategies.

Example Usage

“We'd spent 8 months on the feature. Recognizing sunk cost fallacy, we asked: 'Starting fresh, would we build this?' No—so we killed it.”

Common Misconceptions

Persistence always beats quitting. Persisting because of sunk costs, not future potential, is the fallacy.
Sunk costs are always irrelevant. Learning and relationships from past investment can have future value.
Only applies to money. Time, emotional investment, and public commitments all create sunk cost traps.

Explore More Resources

Browse Tools

Discover 100+ vetted tools for every stage of your startup journey

Explore all tools

Build Your Stack

Take our personalized quiz to get tool recommendations for your startup

Start the checklist

Recommended Reading

Curated books to help you learn, grow, and succeed as a founder

View book recommendations

Listen & Learn

Top podcasts covering startups, product, growth, and entrepreneurship

Discover podcasts

Help us improve this definition

See something that could be clearer or more accurate? Let us know.

Help us improve this page

Found an error or have a suggestion? We'd love to hear from you.