Sunk cost is defined as “retrospective (past) costs that have already been incurred and cannot be recovered.” (Thanks, Wikipedia.)
My translation: As my father would say, a sunk cost is when you start “throwing good money after bad.” We have incurred a loss, yet we refuse to stop sinking the time and effort into that bad bet or lost gamble.
The best example of this is sitting in my closet: a $200 dress that is a size too small. I swear I will lose those 20 pounds so I can wiggle into that dress; that’s $120 a month on a gym membership rarely used. I also have the perfect wig ($60) to wear with the dress. I refuse to discuss the shoes I want for this dress. A dress that has been in my closet for two years. I continue to sink money into this dress fantasy.
Another example could come from the relationship realm. We frame relationships as the waste of a resource. The currency of many relationships is time. Time has been spent. I have put in so much time. I’ve wasted four months with him. I’ve put in time working on him. I’ve invested two years, 9 months and 16 days into this. I’m four dates in with this good-on-paper-but boring/horrible/barbaric man, so I should get at least a surf-and-turf dinner at Red Lobster.
We throw good love after bad and throw the treasured parts of ourselves after bad timing, bad experiences, and bad boys. Or as the proverb states, casting our pearls of time, energy, psyche, and love before swine.
In love and life, sunk cost is about passing the point of no return. We have done a lap around the Monopoly board, passed go again and collected $200. But we are unsure and miserable, confused and hazy about the next lap. We’ve seen St. James Place, Baltic Avenue and Marvin Gardens before during the first, second, and third laps. Are you sure you want to go back there again to buy another property?
Of course that is a game and this is life. We as humans hate losing. We are loss averse. We fear risk. We believe that if you work hard at something, with someone, you deserve it and all the accompanying (future) rewards.
I want to be in that dress and be the belle of the ball. She wants to be with Guy A who is perfect on paper yet horrible in reality because of the time spent with him.
Time spent is not the same thing as time invested. The time and money I have spent on my fantasy dress could have been invested in going to the gym or buying something that was appropriately fitting. The time and money sunk into a relationship that is going nowhere could have been invested in yourself or in another relationship.
We make decisions based on future costs and benefits, not on what has happened or what has been invested in the past. Be in the present. The past is a prologue full of sunk costs.